Housing: Builders and buyers gaining confidence

David Brancaccio Jan 18, 2012

Stocks got another push from a surprisingly strong report on the housing market today. The National Association of Home Builders index rose four points to 25, its highest level since June 2007. Any reading below 50 is still a negative outlook, but today’s report marked four months of a consecutive increases. Some are asking if we’ve seen the bottom of the housing market.

Mark Vitner is a senior economist at Wells Fargo in Charlotte. He’s encouraged about today’s numbers, but stresses it’s a “modest improvement.” Vitner says you need to factor in the unseasonably warm weather that much of the Midwest and Northeast have been experiencing. That’s made it easier for builders to put up spec homes and for prospective buyers to look around at a time when inventories are usually pretty low.

Low-interest mortgages also help, but Vitner says “what’s really changing consumer psychology is that layoffs have slowed.” He says folks are ending up feeling more secure in the jobs they have and they’re finally feeling like taking a look around to either buy a first time home or upgrade their current abode.

Vitner adds there are a couple of bumps in the road ahead for housing. First, there’s a question of how much shadow inventory is out there — homes that are either in foreclosure or already owned by banks could add to the glut of existing homes on the market. Second is the question of how far the federal government will go to help get housing back on its feet. Vitner says housing is the huge missing puzzle piece of this recovery and it will likely take more government intervention to stimulate real growth.

Until then, we’ll take the glass half-full position and see today’s home builders’ index as a sign that things are on the mend, however slowly they may be.

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