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Builder confidence holds steady

By Judy Martel · Bankrate.com
Wednesday, November 20, 2013
Posted: 3 pm ET

Builders remain cautiously optimistic this month regarding new, single-family home sales, even as a slew of economic factors bombard housing. The National Association of Home Builders/Wells Fargo Housing Market Index remained flat in November, from a downwardly revised level of 54. Analysts had expected the index to rise to 56.

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Blame Congress

addition-remodel-lg"Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road," NAHB Chairman Rick Judson said in a release. "Meanwhile, builders continue to face challenges related to rising construction costs and low appraisals."

In addition, there is still a backlog of homes left over from the pre-bubble days of overbuilding, says Jeremy Edwards, lead analyst for research firm IBISWorld.

Will consumers feel more confident?

On the economic front, the government shutdown put the brakes on consumer confidence, which had been steadily rising in the three months leading up to the shutdown, Edwards says. "Overall, economic growth has been slower than expected in 2013," he adds.

He believes economic growth will accelerate as we head into 2014 and expects the consumer confidence index to rise by 6.1 points in 2014, to 72.9. "People will begin feeling better about their job prospects and overall financial situation," he says.

The builder confidence index measures three areas: home sales (this part of the index remained steady in November at 58); expectations of future sales (which dropped 1 point, to 60); and prospective-buyer traffic (which fell 1 point to 42). A measure of 50 marks the dividing line between positive and negative sentiment.

Half a year of feeling kinda good

This marks the sixth consecutive month when more builders viewed the market as good rather than poor. Regionally, the index was unchanged in the South, at 56, and in the West, at 60. The Northeast posted a one-point gain to 39, and the Midwest fell three points to 60.

Keep up with your wealth and mortgages and follow me on Twitter: @JudyMartel.

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