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Economic Watch: Homebuilder Confidence Up Amid Bearish Expectations

August 18, 2014

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Builder confidence in the market for newly built, single-family homes rose two points to 55, according to the National Association of Home Builders/Wells Fargo Housing Market Index for August, released Monday.

This third consecutive monthly gain brings the index to its highest level since January.

“As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market,” said NAHB Chairman Kevin Kelly. “However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished lots and labor.”

All three HMI components posted gains in August. The indices gauging current sales conditions and expectations for future sales each rose two points to 58 and 65, respectively. The index gauging traffic of prospective buyers increased three points to 42.

Every region saw a gain in its three-month moving average HMI score in August. The Midwest posted a seven-point increase to 55 and the West registered a four-point gain to 56. The Northeast posted a two-point gain to 38 and the South was up one point to 52.

“This morning's rise suggests home builder's confidence in market conditions continues to improve as we move further into the third quarter,” said Lindsey Piegza, chief economist with the investment firm Sterne Agee. “Although, contrary to a rise in expectations, tomorrow, July starts are expected to fall 9% and permits 4%, calling into question the validity of industry insiders' optimism.”

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