Builders’ confidence in the market for new single-family homes improved but remained quite low as the National Association of Home Builders' (NAHB) housing market index — a monthly gauge of builder sentiment — gained to 20 in November from 17 in October.

The October number was originally reported as 18.

Thomson Reuters' poll of economists predicted the index would be 17.

“While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to the many challenges that home building continues to face with regard to the high number of foreclosures, the difficulties of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers,” said NAHB Chairman Bob Nielsen. “These problems must be addressed so that housing can contribute to economic and job growth the way it has in the past.”

“This second consecutive gain in the HMI is evidence that well-qualified buyers in select areas are being tempted back into the market by today’s extremely favorable mortgage rates and prices,” NAHB Chief Economist David Crowe said. “We are anticipating further, gradual gains in the builder confidence gauge heading into 2012 due to these pockets of improving conditions that are slowly spreading.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor."

The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low."

Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

All three component indexes increased in October. The current single-family home sales index climbed to 20 from 17, and the sales expectations index for the next six months rose to 25 from 23. The traffic of prospective buyers index increased to 15 from 14.

Although these levels remain quite low, the traffic and current sales numbers are at their highest levels since May 2010, and expectations haven’t been this high since March.

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