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Dreamtownrealty's Blog

By Robert Pratt | Broker in Chicago, IL

Confidence Rises as Positive Home Building Trends Increase

A recent report from the National Association of Home Builders (NAHB) has shown a more optimistic trend for the country’s housing market. According to a December article in the Wall Street Journal, the NAHB announced a rise in the housing market index for three months in a row. There was an increase in December 2011 (to 21), up from 19 in November 2011. This is notably the highest the index has reached since May 2010.

 

The trend is better than expected. Results from previous polls predicted a reading of 20 for the end of the year. This positive progression reveals the first time the index has improved for three straight months since the middle of 2009.

 

The builder’s trade group saw gains in all three areas of its index, which could be a good sign for prospective buyers of Chicago real estate. Traffic from potential buyers jumped three points. Expected sales for the next six months grew, as did builder’s assessments of present-day sales.

 

The WSJ article quoted Chief U.S. Economist Ian Shepherdson as saying, “The last time the index was close to this level, activity was being artificially boosted by the homebuyer tax credit, so to see the NAHB index rising strongly without policy support is hugely encouraging. It is not a coincidence, we think, that the index is rising at the same time the loan-to-price ratio for new mortgages is rocketing back to near-boom levels. As more people believe they can qualify for a mortgage on sensible terms, pent-up demand seems to be emerging.”

 

One builder analyst had this to say about the improved index… “For the second month in a row the index was above the range bound levels it has been in for most of this year. We believe this supports our view that conditions in the new home market have bottomed. Further, our channel checks suggest that demand trends have accelerated into year end, outperforming normal seasonal patterns.”

 

December’s index was derived from a survey of 477 builders nationwide. According to the WSJ, the index went up in the South and West regions. Overall, it looks as though the positive trend emerging at the end of 2011 will continue to grow into 2012. All in all, a step in the right direction for the residential real estate market and the construction of new homes in cities like Chicago.

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