Builders' outlook less gloomy on the housing market

Builders are feeling less gloomy this month as mortgage rates remain low, but their improved outlook isn't signaling a faster-paced housing market recovery. 

The National Association of Home Builders said Wednesday that builder sentiment rose 3 points to 20 in November, the highest level since May of last year and at 20 or above for the first time in two years. 

Still, any reading below 50 indicates negative sentiment about the housing market. It hasn't reached 50 since April 2006, when the housing market went from boom to bust. 

The builders confidence in the market for newly built, single-family homes also rose by 3 points to 20 from a revised 3-point increase to 17 in October, bringing the confidence gauge to its highest level since May of 2010.

"While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to the many challenges that home building continues to face with regard to the high number of foreclosures, the difficulties of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers," said Bob Nielsen, NAHB Chairman and a homebuilder from Reno, Nev. 

"These problems must be addressed so that housing can contribute to economic and job growth the way it has in the past."

David Crowe, chief economist for NAHB, said the gain is also evidence that well-qualified buyers are being tempted back into the market by low mortgage rates and good prices. 

"We are anticipating further, gradual gains in the builder confidence gauge heading into 2012 due to these pockets of improving conditions that are slowly spreading," he said. 

Home sales hit their lowest level in 50 years in 2010 and are on a similar track this year. 

The index gauging future sales expectations rose two points to 25, the highest level since March, while the component tracking traffic of prospective buyers rose one point to 15, the highest point since May of 2010.

The index was up in three out of four regions in November, with a 3-point gain to 17 in the Northeast, an 8-point gain to 23 in the Midwest, and a 2-point gain to 21 in the South. After posting a big increase in October, the West returned to trend this month with a 6-point drop to 15.