Home builder outlook remains dim

Homebuilders group reports increased traffic by potential buyers, but the outlook for the near future is darkening.

February 19 2008: 1:50 PM EST

NEW YORK (CNNMoney.com) -- More potential home buyers are on the hunt, but the nation's homebuilders still have a grim view of the prospects for a turnaround over the next six months.

Those are two key elements of the latest reading on a key index of home builders' confidence, which edged slightly higher in February because of a modest pickup in the number of prospective buyers, according to the National Association of Home Builders/Well Fargo.

Still, home builders' outlook for the near future turned negative in February.

The National Association of Home Builders/Well Fargo Housing Market Index, released Tuesday, increased one point to 20 this month, after hitting a historic low of 18 in December.

The survey is comprised of three subindexes that measure homebuilders' view of current market conditions, their outlook for the next six months, and the level of buyer traffic.

The index that measures current buyer traffic showed the most significant improvement in February, rising to 19 from 14 in January. The survey of present housing market conditions increased one point to 20.

But the index that measures builders' view of the marketplace 6 months from now slipped to 27 from 28 in January.

"Some potential buyers who have been sitting on the sidelines are starting to at least research a new home purchase given improving affordability factors and the large selection of units on the market," said NAHB Chief Economist David Seiders.

"That said, builders know there's a difference between people looking and people buying, and their current outlook remains quite subdued," Seiders added.

The housing market, which has been deteriorating since last summer's subprime mortgage debacle, has become a major drag on the U.S. economy. In response, the U.S. government has enacted a stimulus plan to help boost economic activity and prevent a recession.

"Housing has always been a major engine of economic growth, and despite the ongoing market correction, it will once again be that engine in the future. But in order for that to happen, Congress must follow up on its recently enacted economic stimulus program by passing legislation that will jump-start the housing market and keep the economy moving forward," said Sandy Dunn, president of the National Association of Home Builders.