Home builder sentiment up for 1st time in 7 mos

By Julie Haviv

NEW YORK (Reuters) - U.S. home builder sentiment rose for the first time in seven months in September, inching off a record low, as falling mortgage rates and an array of factors buoyed confidence, an industry group said on Tuesday.

The National Association of Home Builders said its preliminary NAHB/Wells Fargo Housing Market Index rose 2 points to 18, rising from 16 of the previous two months. The gauge started in January 1985.

The turn for the better offers a glimmer of hope for the U.S. housing market, currently suffering the worst downturn since the Great Depression.

The September index was one point above expectations based on a Reuters survey of economists.

Readings below 50 indicate more builders view market conditions as poor than favorable.

"Builders have several reasons to be more optimistic at this time," NAHB President Sandy Dunn, a home builder from Point Pleasant, West Virginia, said in a statement.

"Many are sensing that home sales are nearing a turning point with the support of the newly enacted first-time home buyer tax credit," she said.

Furthermore, with the U.S. government's explicit backing of Fannie Mae and Freddie Mac, this should help keep mortgage rates at very favorable levels, she said.

The gauge of current single-family home sales rose to 17 from 16. The index of sales expected in the next six months surged to 30 from a revised 24. The prospective-buyer traffic measure increased to 14 from a revised 13, the group said.

MORTGAGE RATES FALL

After the U.S. Treasury Department's announcement that it was placing mortgage giants Fannie Mae and Freddie Mac into conservatorship last week, the average rate on 30-year fixed-rate conforming home mortgages declined by nearly half a percentage point, falling to below 6 percent for the first time in several months, the NAHB said.

The U.S. government's seizure of Fannie Mae and Freddie Mac could be its biggest federal bailout ever, which was made to support the U.S. housing market and ward off more global financial market turbulence.

Market responses to the bankruptcy of Lehman Brothers Holdings Inc LEH.N and the purchase of Merrill Lynch & Co Inc MER.N by Bank of America Corp (BAC.N) have put additional downward pressure on prime conforming mortgage rates, the NAHB said.

Other positive factors buoyed home builder sentiment.

"Nearly half of the builders in our September survey indicated that they expect to see a positive impact from the tax credit in their market areas," NAHB Chief Economist David Seiders said in a statement.