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Homebuilder confidence jumps

Signs of recovery - and perhaps a bottom - emerge in housing market report; largest monthly increase since 2003.

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By Aaron Smith, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- In a strong sign that the housing market may be picking up, builder confidence in April made its most dramatic increase in nearly seven years, according to an industry report.

The Housing Market Index, a survey-based measurement of sales, as well as sales expectations, rose by more than 50% in April, according to the National Association of Home Builders, which compiles the index with Wells Fargo.

The index rose to 14 from its prior level of 9, which was the biggest increase since May 2003.

"After a very long period of extreme distress, it's given the builders some sense of reaching a bottom," said David Crowe, chief economist for the association.

The index has had a volatile history. It was launched in January 1985 with a baseline level of 50. It fell to 20 in 1991 and then peaked above 70 in the bubble years of 1998 and 1999. The index fell below 50 again in 2001, then ascended gradually until June 2005, when it reached 72.

After that, the index fell into its most prolonged descent. There have been occasional lifts, but they have been temporary. Last April it was at 20 and then sank to the single digits in November, where it remained until this month's increase.

The survey is a composite of ratings, based on builders' perceptions of single-family home sales, their expectations for sales over the next six months and volume of prospective buyers.

Of these various components, the largest increase in April came from sales expectations for the next six months. According to Crowe, this is also the area that had suffered the steepest declines in recent months.

The market index rose in every region of the United States in April, with housing activity in the Northeast growing at twice the pace of the West. The index in the Northeast rose eight points, for a total of 16; the West gained four points, for a total of 9.

More housing reports on the way

Going forward, the government will release its monthly report on the construction market for residential housing on Thursday. The projections don't paint as optimistic a picture.

The U.S. Census Bureau is expected to announce that building permits totaled 550,000 in March, according to a consensus of economist estimates compiled by Briefing.com. This would be nearly unchanged from the prior month's tally of 547,000 permits.

The Census Bureau is also expected to report that housing starts totaled 550,000 in March, according to Briefing.com consensus. That would be a significant decline from 583,000 in the prior month. To top of page

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