Industry Getting a Boost in Confidence

The National Electrical Manufacturers Association (NEMA) Electroindustry Business Confidence Index (EBCI) for current North American conditions increased for a third straight month and topped the 50-point threshold indicative of expansion for a second straight month in September. Also, builder confidence in the market for newly built, single-family homes edged higher for a third consecutive month in September, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The EBCI rose 5.3 points to 58.6, its highest reading since April 2006 and more than 50 points above its cyclical low of 8 in December 2008. The EBCI for future North American conditions also climbed in September, reaching its highest level—69.0—since August 2005. This reading implies that a significant proportion of industry leaders foresee some degree of improvement in the business situation within the next six months.

Meanwhile, the HMI rose one point to 19 in September, its highest level since May 2008.

“Builders are seeing some improvement in buyer demand as a result of the first-time home buyer tax credit, and low mortgage rates and strong housing affordability have also helped to revive some optimism,” said Joe Robson, chairman of the National Association of Home Builders (NAHB).

This is all good news, indicative of a recovering market and economy. However, there’s a potential problem ahead that has contractors uncertain.

“The window is now basically closed for being able to start a new home that can be completed in time for buyers to take advantage of the tax credit before it expires at the end of November, and builders are concerned about what will keep the market moving once the credit is gone,” Robson said.

The HMI component for gauging sales expectations for the next six months fell a bit in this report, and according to David Crowe, NAHB chief economist, it’s a sign of contractor uncertainty. The NAHB would like to see action from Congress to help sustain the recovery, but the first-time homebuyer tax credit has not yet been proven to be the keystone of recovery. Some see the expiration of the tax credit as a trial of the market: if conditions continue to improve past the expiration date, it will be a good sign for the eventual full recovery.

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