U.S. home builders are feeling a little less pessimistic about the struggling housing market. But their mood hasn't changed enough to signal a recovery anytime soon.
The National Association of Home Builders said Wednesday that its builder sentiment index rose to 20 in November. That's the highest level since May 2010 and only the second month the index has been at 20 or above in two years. The trade group cited low mortgage rates as a chief factor.
Still, any reading below 50 indicates negative sentiment about the housing market. It hasn't reached 50 since April 2006, the peak of the housing boom.
Last year, the number of people who bought new homes fell to its lowest level on records going back nearly a half-century. Sales this year could fare just as bad.
Builders are struggling to compete with foreclosures, which have made the price of previously occupied homes more competitive. Many buyers are having difficulty obtaining loans or meeting higher down payment requirements.
Low appraisals are scuttling some deals after contracts have been signed. Some buyers want to upgrade to a new house but are holding off because they can't sell their home.
Those who are in a position to buy are benefiting from lower prices and cheap mortgage rates. The average rate on the 30-year fixed mortgage has fallen below 4 percent twice this year. But so far, those factors haven't done much to boost home sales.
David Crowe, the builders group's chief economist, said the group is expecting future gains in builder confidence heading into 2012. The group cites several regional pockets of strength as the main reason. New Orleans, Pittsburgh and other smaller metro areas have shown improvement, the trade group said.
While new homes make up a small portion of sales, they have an outsize impact on the economy. The builders' trade group says each new home built creates an average of three jobs for a year and generates about $90,000 in taxes.
The outlook for current single-family home sales increased three points to 20, according to a separate gauge in the survey. Builders are also more optimistic about future sales expectations and foot traffic of prospective buyers.
Builders' outlook in the Midwest rose eight points to 23. The Northeast rose three points to 23. The South increased two points to 21. After a big October increase, the West fell six points this month to 15.
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