Builders' Confidence Grows, But Fears Loom

December 19, 2012

Builders’ optimism over the direction of the housing market continues to grow, but the “fiscal cliff” has many in the industry concerned. 

An index measuring builder sentiment reached 47 in December -- a big boost over last year at this time, when the index stood at less than half of that at 21, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Fifty is the line between positive and negative builder sentiment. 

"Builders across the country are reporting some of the best sales conditions they've seen in more than five years, with more serious buyers coming forward and a shrinking number of vacant and foreclosed properties on the market," says Barry Rutenberg, NAHB chairman. "However, one thing that is still holding back potential home sales is the difficulty that many families are encountering in getting qualified for a mortgage due to today's overly stringent lending standards."

The index measures builder sentiment over current sales, sales expectations, and buyer traffic. Builders’ expectations for current sales rose two points to 51 -- reaching into the positive territory “for the first time since the housing crash,” CNBC reports. 

However, some builders are concerned over the looming “fiscal cliff” and how it will impact the housing recovery. Some builders are even reporting delaying projects or even laying off workers over fears that money for construction will be more difficult to obtain if lawmakers can’t reach a deal before the end of the year. 

Eighteen CEOs of home building companies teamed up to issue a letter to President Obama and House Speaker John Boehner, urging a resolution to the fiscal cliff. 

"We support a comprehensive agreement in Washington to avoid the fiscal cliff that includes revenue increases (including tax rate adjustments) together with meaningful entitlement reforms,” the builders wrote. “We believe that a properly balanced agreement will breed confidence in the political system and the U.S. economy, will enable the housing market to continue its recovery, and, in turn, will promote broader economic growth."

Source: “Home Builders Still Feel Better, Despite ‘Cliff’ Concerns,” (Dec. 18, 2012)

Read More

Fiscal Cliff: What's at Stake for Real Estate