Homebuilders are a little more optimistic about the prospects for home sales over the next six months, but an index reflecting the sector's confidence overall remained at an all-time low, an industry trade association said Monday.
The National Association of Home Builders/Wells Fargo housing market index remained unchanged this month at 16, where it's been since July.
But benchmarks for sales improved: The gauge of current sales conditions climbed one point to 16, while an index of builders' sales expectations over the next six months rose by two points to 25.
Despite the silver lining, several major builders' stocks tumbled Monday, with Miami-based Lennar Corp. leading the decline as its shares plunged 95 cents, or about 8 percent, to $10.87 in afternoon trading.
The slightly brighter outlook for sales comes as builders factored in the potential benefits from the landmark housing stimulus legislation enacted last month.
The law includes a temporary $7,500 tax credit for first-time homebuyers that essentially works out to a 15-year, interest-free loan.
"Builders are anticipating the stimulative effects of this legislation and are optimistic that the tax credit will give those buyers who've been sitting on the fence the reason they need to jump back into the market," NAHB President Sandy Dunn said in a statement.
The sector lobbied strongly for the provision, although builders differ on how much of a difference the measure will have in stimulating sales.
Some, including Donald Tomnitz, chief executive of the nation's biggest builder, Fort Worth, Texas-based D.R. Horton Inc., have said the tax credit doesn't offset the elimination of a down payment assistance programs.
Such programs let a seller channel down payment money through a charity and onto a homebuyer and have become a key affordability tool for first-time homebuyers.
The latest housing market index reflects a survey of 376 residential developers nationwide, tracking builders' perceptions of current market conditions and expectations for home sales over the next six months.
Index readings higher than 50 indicate positive sentiment about the market. The seasonally adjusted index has been below 50 since May 2006. Since then, the index has been on a downward trajectory as industry's fortunes have soured.
Demand for new and preowned homes is down industrywide, adding to a glut of unsold and foreclosed properties on the market. That's keeping downward pressure on home prices and contributing to smaller profit margins for builders.
While the overall measure of builders' confidence remained at a record low, the uptick in the sales-related index suggests the market may be close to hitting bottom, NAHB Chief Economist David Seiders suggested.
"Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond," he said in a statement.
While the current sales and expected sales components of the index rose, the gauge of prospective buyer traffic remained unchanged from July at 12, the NAHB said.
By regions, the Northeast and Midwest each posted gains in builder confidence. The South remained unchanged, while the West declined three points.