Builder sentiment rises from record low

WASHINGTON -- Battered housing developers are a getting a bit more optimistic about their prospects for the next six months, an index of the sector's confidence showed Tuesday.

The National Association of Home Builders/Wells Fargo housing market index rose two points to 18 this month from an all-time low of 16 in July and August.

The survey was taken in the first 10 days of September, and for the most part doesn't reflect the fall in mortgage rates since the government's takeover of mortgage finance companies Fannie Mae and Freddie Mac. It also doesn't take into account this week's Wall Street turmoil, which may push rates even lower as nervous investors move into government bonds.

Immediately after the Fannie and Freddie seizure, "the positive impact on mortgage rates was probably not apparent to many builders," said David Seiders, the trade group's chief economist.

Average rates on 30-year fixed-rate mortgages dipped to 5.93% last week, from 6.35% on the Thursday before the takeover, according to Freddie Mac's weekly survey. Rates had been bouncing from 6% to 6.5% since late May.

Builders have been slammed by a combination of falling home prices, soaring foreclosures and an oversupply of unsold homes languishing on the market. But the industry is growing hopeful that consumers will finally take advantage of deeply discounted prices.

Another key reason for the improving outlook: a temporary $7,500 tax credit for first-time homebuyers passed by Congress this summer. The credit essentially works out to a 15-year, interest-free loan.

Many in the industry "are sensing that home sales are nearing a turning point," said Sandy Dunn, a home builder from Point Pleasant, W.Va. and the trade group's president. New-home sales likely will stabilize by year-end, Seiders said.

All three components of the index improved, with the largest gain in the index of builders' sales expectations over the next six months. That gauge rose six points to 30.

Gains in builder confidence were seen across the U.S., with the largest gain in the Northeast, where confidence rose six points.