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Builder Confidence Rose in September
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Builder confidence in the market for newly built single-family homes rose for the first time in seven months
this September, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
The HMI gained two points, to 18, rising from its record low of the previous two months.
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The survey asks builders to rate traffic of prospective buyers as "high to very high," "average" or
"low to very low." Scores for each component are then used to calculate a seasonally adjusted index where
any number over 50 indicates that more builders view sales conditions as good than poor.
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"Builders have several reasons to be more optimistic at this time," noted NAHB President Sandy Dunn, a home
builder from Point Pleasant, WV. "Many are sensing that home sales are nearing a turning point with the support
of the newly enacted first-time home buyer tax credit. Meanwhile, with the government's explicit backing of
Fannie Mae and Freddie Mac now assured, this should help keep mortgage rates at very favorable levels going forward."
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Following the Treasury Department's announcement that it was placing mortgage giants Fannie Mae and Freddie
Mac into conservatorship, the average rate on 30-year fixed-rate conforming home mortgages declined by nearly
half a percentage point, falling to below 6% for the first time in several months. Market responses to the
Lehman Brothers bankruptcy filing and the purchase of Merrill Lynch by Bank of America have put additional
downward pressure on prime conforming mortgage rates.
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"Nearly half of the builders in our September survey indicated that they expect to see a positive impact from
the tax credit in their market areas," said NAHB Chief Economist David Seiders. "Of those respondents, 20% said
their market has already experienced some of this effect. Meanwhile, consumer confidence has risen and more
households are saying that now is a good time to buy a home. All of these factors, along with the recent downward
movements in mortgage rates, suggest that new home sales will be stabilizing in the final quarter of the year."
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Derived from a monthly survey that NAHB has been conducting for more than 20 vears, the NAHB/Wells Fargo HMI
gauges builder perceptions of current single-family home sales and sales expectations for the next six months
as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to
very high," "average" or "low to very Iow" Scores for each component are then used to calculate a seasonally
adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
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All three of the HMI's component indexes rcgistcrcd gains in September. The indexes gauging current sales
conditions and traffic of prospective buyers were each up a single point, to 17 and 14, respectively.
Meanwhile, the index gauging sales expectations for the next six months rose by six points, to 30,
which was four points higher than its year-ago level.
All regions also posted some degree of improvement in the September HMI, with the Midwest, South and West
each up two points, to 15, 22 and 12, respectively, and the Northeast posting a six-point gain to 22.
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The NAHB/Wells Fargo housing Market Index is strictly the product of NAHB Economics and is not seen or
influenced by any outside party prior to being released to the public. HMI tables can be accessed online
at www.nahh.org/hmi. More information regarding housing staistics is also available at www.housingeconomics.com
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