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Homebuilder sentiment index jumps in April

U.S. homebuilders are seeing a pickup in sales and customer traffic as homebuyers rush to qualify for tax incentives set to expire at the end of the month, and that’s made them more optimistic.

The National Association of Home Builders said Thursday its housing market index, which tracks industry confidence, jumped four points this month to 19, the highest reading since September.

It’s no coincidence that the last time builders felt this good about their business prospects there was another tax credit deadline looming that motivated buyers.

The tax credits — $8,000 for new buyers and $6,500 for current owners — expire at the end of this month. That, coupled with low mortgage interest rates have helped gin up sales for builders.

But when asked to look beyond this month, builders remain less hopeful, and with good reason. Many economists contend the tax incentives are making more buyers pull the trigger now, so sales will drop in the second half of this year. In addition, high unemployment and tight mortgage lending continue to keep many buyers on the sidelines.

“Builders have a more neutral view of what may come in the next six months, and are very aware of the many factors that continue to drag on housing at this time,” said David Crowe, the trade association’s chief economist.

Builders also have had to compete with heavily discounted foreclosed homes. And new data this week suggested that’s not going to end any time soon.

The number of homes seized by banks jumped 35 percent in the first quarter from a year ago, RealtyTrac Inc. said Thursday. In addition, households facing foreclosure increased 16 percent in the same period and 7 percent from the last three months of 2009.

More homes were taken over by banks and scheduled for a foreclosure sale than in any quarter going back to at least January 2005, when the foreclosure listings firm began reporting the data.

“We have to go down the road a little bit longer before we’re going to see the sun come out,” said Eric Stewart, a real estate agent in Rockville, Md.. “It’s going to be a bit of a rough ride going forward for a while.”

The main reason homeowners are falling behind on payments this year is because they have lost their jobs. Many are unable to refinance because they now owe more on their loan than their home is worth.
Sales of new homes posted monthly declines between November and February. March data will be released next week.

The latest index of builder sentiment bodes well for April sales, however.

The reading for current sales conditions jumped five points to 20. The index measuring foot traffic from prospective buyers rose four points to 14, while the index for sales expectations over the next six months inched up one point to 25.

Readings below 50 indicate negative sentiment about the market. The last time the index was above 50 was in April 2006. The report reflects a survey of 417 residential developers nationwide.