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, released on Tuesday afternoon. The HMI gained two points to 18, rising from its record low of the previous two months — but still very near the all-time lows set in July and August. Driving the gain was a jump in expectations for sales over the next six months, in particular, driven by optimism from the government’s takeover of Fannie Mae (FNM) and Freddie Mac (FRE). “Builders have several reasons to be more optimistic at this time,” noted NAHB President Sandy Dunn. “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.” No word on whether the financial market meltdown has since tempered some of that enthusiasm; Oppenheimer & Co. analyst Meredith Whitney on Monday said that she expects housing to suffer further price declines due to an emerging lack of liquidity in the mortgage market. Following the Treasury Department’s announcement that it was placing mortgage giants Fannie Mae and Freddie Mac into conservatorship last week, the average rate on 30-year fixed-rate conforming home mortgages declined by nearly half a percentage point, falling to below 6 percent for the first time in several months. But low rates are only one part of the picture for housing; credit standards appear set to be tighter than ever as the credit crunch rolls on. “Low mortgage rates aren’t as important to a national housing recovery as looser mortgage guidelines,” Dan Green, loan officer at Chicago-based Mobium Mortgage and author of a mortgage blog at, recently told HW. “A 5 percent rate is useless if you can’t get approved for it.” Nontheless, NAHB chief economist David Sieders noted that half of builders surveyed this month expect to see a positive impact from the recently-enacted tax credit, and said that he expects “new-home sales will be stabilizing in the final quarter of the year.” At HW, we simply can’t agree with Seider’s assessment; a huge inventory overhang is clearly being pushed behind a slight jump in builder sentiment, althought most housing economists will look at inventory as a critical aspect of any re-balancing effort in housing. And, by nearly every measure, there is simply too much supply. Which means new homes likely will remain vulnerable for longer than Seiders or the NAHB seem to expect or hope. For more information, visit Disclosure: The author held no relevant positions when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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