Homebuilders Are Looking Up PDF Print E-mail

Confidence among homebuilders rose for the second straight month, helped by the feds' tax credit for first-time home buyers

By Phil Mintz

In another sign of economic stabilization, homebuilder confidence rose for the second straight month, the National Association of Home Builders reported on May 18. The index remained at extremely low levels, however.

The group said builders are responding to incentives being offered to home buyers, including an $8,000 federal tax credit for first-time buyers. Builder confidence was also boosted by a recent move by the Housing & Urban Development Dept. to allow buyers to apply the credit to a home's down payment, the organization said.

The May index for single-family homes rose to 16, after a five-point jump, from 9 to 14, in March. A rating of 50 or above means the builders' outlook is good; a rating below 50 indicates poor conditions. The index reached a record low of 8 in January, and it now stands at its highest level since last September, when it was 17.

Builders Looking for Better Access to Credit

Confidence improved in three of the four regions tracked by the report. The Midwest remained flat.

"The fact that the May [index] continued to tick up from April's five-point increase provides confirming evidence that the improved confidence level was no fluke," NAHB Chief Economist David Crowe said in a statement. "This continued increase indicates that homebuilders feel we're at or near the bottom of the market and that positive signs lie ahead for builders and potential home buyers, provided that builder access to production credit significantly improves."

Analysts at Action Economics said: "The better-than-expected data should be supportive for stocks and may further pressure Treasuries slightly lower."

Mintz is news editor for BusinessWeek.com in New York.

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