Housing market optimists picked up another bullish datapoint this morning, as the National Association of Homebuilders (NAHB)/Wells Fargo builder confidence index rose to 16 from 14 last month. According to Bloomberg, that’s the highest reading since last September.

So what happened the last time builders felt this good about their prospects? Lehman Brothers went belly up, Washington Mutual and Wachovia collapsed into the arms of JP Morgan Chase and Wells Fargo, respectively, and the financial system nearly imploded. Sure, history is unlikely to repeat itself, but using this measure to try and predict the future is like trying to predict the weather 6 months in advance: An experiment in futility.

According to NAHB Chairman Joe Robson, “Builders are responding to what they perceive to be some of the best home buying conditions of a lifetime.” Here, Robson is echoing his sentiments from March and April, even as property values continue to fall.

By RYAN TAYLOR

Just when you thought the market for new homes couldn’t get any worse, it did.

The National Association of Home Builders (NAHB)/Wells Fargo January builder sentiment index dropped to 8 from 9. While the homebuilders were setting records for new home sales in 2005 and 2006, they’re now setting records for the lowest confidence on record, as 8 breaks last month’s record low of 9.

The homebuilders are very clear on what needs to happen to bring back their confidence and revive the market for new homes (Hint: It has nothing to do with building homes that people want to live in for the right price.)

“Conditions in the nation’s housing market aren’t getting any better, and they aren’t going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market.” NAHB Chairman Sandy Dunn said.

One of the biggest reasons we are in this housing crisis is that builders put millions of buyers in homes they couldn’t afford. Through questionable relationships and kickbacks, builders partnered with lenders to encourage buyers to stretch beyond their means. This common practice during the boom created a massive over-supply of homes which has yet to be worked through.

As a result, homebuilders are left with basically two choices – 1) offer homes at prices that are reflective of the current market conditions or 2) do not sell any homes and plead for Uncle Sam to help them.

Needless to say, they’re not going for option number one because it will put most of them out of business. Furthermore, the NAHB seems delusional on why people are not buying their homes.

“Qualified buyers are clearly in the wings but they’re looking for a significant signal from the federal government that now is the time to return to the market” NAHB Chief Economist David Crowe said.

This statement makes the assumption that qualified buyers are not in the new home market because the government needs to give them some kind of divine signal to know when to buy. As an alternative explanation, I think qualified buyers are not buying new homes because they’re far away from job centers, listed above market and were built by companies that frequently stop work on projects halfway through– existing residents be damned.

Until one of the major publicly traded home builders goes out of business, we are not near the bottom in the housing cycle.

By RYAN TAYLOR

It’s still a lousy time to be selling new homes.

The National Association of Home Builders, or NAHB, shared its sentiment index for December, which remained at a record low of 9. The index is based on 426 residential developers nationwide; a reading below 50 reflects negative sentiment. In addition to the general index number, confidence levels for current sales dropped to 8 from a reading of 9 last month. The six-month sales forecast dropped from 18 to 16. To say confidence remains extremely low is a bit of an understatement.

The NAHB sentiment index number is an important gauge of the health of the overall market. In many of the hardest hit areas of the country, there remains a glut of housing supply – particularly new construction. Homebuilders are aggressively cutting prices, which is adding to existing downward pressure on prices caused by foreclosures. Since new homes are often more desirable than existing homes, watch any strength in homebuilder sentiment as a prelude to possible strength in the broader market.

While many prognosticators are starting to believe we’re moving into a bottoming phase in the housing market, the chief economist of the NAHB, David Crowe, remains unconvinced:

“We have seen no improvement over the past month in terms of sales conditions for new homes. In fact, certain factors have gotten progressively worse, not the least of which is the job market, where massive layoffs are having a devastating effect on consumer confidence.”

The sobering reality of the housing market is that its recovery has been postponed due to the global recession and the resulting job losses. Despite aggressive moves by the Treasury Department and Federal Reserve to lower interest rates and spur demand, people without jobs simply do not buy houses.

By RYAN TAYLOR

Home builders aren’t feeling very confident. And for good reason.

The National Association of Home Builders shared their sentiment index for November Tuesday and the reading was the lowest since they began keeping track. The index dropped 5 points from 14 in October to 9 this month – a 10 point drop from a year earlier. The index is based on a survey of 422 residential developers nationwide and a reading under 50 is viewed as negative sentiment.

Unlike many other data points provided by various real estate trade associations, the NAHB index has been significantly more accurate in conveying the general direction of the market. With a confidence number of 9, there’s no way to sugar coat what’s going in the marketplace.

Home values continue to trend down and nobody feels the pain more than the homebuilders, whose top line is tied directly to how much they can sell homes for. Their business has come to a grinding halt and we believe there will be no sustainable bottom in the housing market until the industry consolidates. Their sentiment reinforces our view point: There’s just not enough business for tens of nationwide homebuilders, each building effectively the same product.

NAHB Chairman Sandy Dunn told Bloomberg, “We are in a crisis situation, tremendous economic uncertainties have driven consumers from the housing market, and it’s going to take some major incentives to bring them back.” Indeed.

The NAHB also provided an index for expected sales over the next six months, which remained at 19. While this number reflects negative sentiment, it is markedly more positive than the overall sentiment, largely because many homebuilders still believe the government ongoing financial market bailout will successfully unfreeze the credit markets. Again, the NAHB index gives an indication of the overall market sentiment as most market participants are hoping the near future will be brighter than today.

Frankly, the homebuilder sentiment cannot get much lower than it is right now. However, this doen’t mean it will rise any time soon. When it does, a sustained trend based on fundamentals – not bailouts – will be required to indicate a true bottom to the housing market. Given the vast amount of uncertainty still plaguing the market, its unlikely a meaningful improvement will be seen in the next six months.

The bottom in housing is still a ways off.