US home building firms were a little bit more optimistic in July but confidence levels remained near historic lows, the National Association of Home Builders said on Monday. The NAHB/Wells Fargo Housing Market index (HMI) rose to 15 in July after falling to a nine-month low of 13 in June, the group said in a statement.
Economists polled by Reuters had predicted the index would rise to 14. Readings below 50 mean more builders view market conditions as poor than favourable.
The rise does not indicate the beginning of a major upward shift, economists said. The index hit more than 70 in June of 2005, before the US housing market collapsed.
"Amid tepid housing market conditions, home builders remain relatively pessimistic about a recovery," Lindsey Piegza, an economist at FTN Financial, said in a statement.
New construction has been stymied by the large overhang of foreclosed homes, one of the biggest challenges facing the US housing market, which crumbled in 2007.
Piegza does not anticipate a significant rise in homebuilder sentiment for at least five years, though she forecast "pockets of recovery" across parts of the South and Midwest.
Sentiment improved this month in all regions of the United States except in the Northeast, the only region to see higher confidence last month.
"There doesn't seem to be any compelling explanations for the wiggles in the HMI over the past few months," Michael Feroli, an economist at JP Morgan, said in a note to clients.
"The index has been in a 13 to 17 range over the past year, and the June drop may have been a bit of an aberration signal of things moving to break out of that range."
Home builders said they thought things would improve slowly - expectations for sales in the next six months rose in July to 22 from 15 in June.
Data on new US home construction, existing home sales, and home prices are expected to show little, if any, improvement later this week.
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