Builder confidence hits six-year high

Builder sentiment hit a six-year high in November, reflecting the growing strength of the housing market recovery. 

Confidence in the market for newly built, single-family homes posted a five-point gain to 46 this month, the seventh-straight month of gains and the highest reading since May of 2006, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Monday.

"While our confidence gauge has yet to breach the 50 mark, at which point an equal number of builders view sales conditions as good versus poor, we have certainly made substantial progress since this time last year, when the HMI stood at 19," said David Crowe, said NAHB's chief economist. 

"At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets."

The survey was conducted in the two weeks following Superstorm Sandy and reflects builder sentiment during that period.

Two out of three of the indexes posted gains in November. 

The component gauging current sales conditions posted the biggest increase, with an eight-point gain to 49 — highest mark in more than six years.

Meanwhile, the component measuring sales expectations for the next six months held above 50 for a third consecutive month, with a two-point gain to 53, and the component measuring traffic of prospective buyers held unchanged at 35 following a five-point gain in the previous month.

"Builders are reporting increasing demand for new homes as inventories of foreclosed and distressed properties begin to shrink in markets across the country," said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. 

"In view of the tightening supply and other improving conditions, many potential buyers who were on the fence are now motivated to move forward with a purchase in order to take advantage of today's favorable prices and interest rates."

All four regions of the country posted gains in the three-month moving averages. 

The South posted a four-point gain to 43, while the Midwest and West each posted three-point gains, to 45 and 47, respectively, and the Northeast posted a two-point gain to 31.