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Instant View: NAHB housing index highest since June

NEW YORK (Reuters) - U.S. home-builder sentiment rose for the first time in five months as builders are starting to see “some flickers of interest” among potential buyers, according to a survey on Monday that continued to show weakness in the housing market.

KEY POINTS: * The National Association of Home Builders/Wells Fargo Housing Market Index rose more than expected to 16 from last month’s 13. * Economists polled by Reuters expected a rise to 14. * A reading above 50 indicates that more builders view sales conditions as good than poor. The index has not been above 50 since April 2006.

COMMENTS:

JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK,

CHICAGO:

“I’m probably the only person that thinks it’s a mixed bag. I actually would like to see home construction at zero. I guess it’s encouraging but it’s the new supply I’m just not crazy about in a market where we’ve got an effective two-and-a-half years’ overhang of supply, according to our calculations.”

KURT KARL, CHIEF U.S. ECONOMIST, SWISS RE, NEW YORK:

“I have been puzzling over why this is so bad in that sector, I keep thinking it has got to turn around, and hopefully this is the turnaround. Basically, rates are very low and typically when rates are this low and housing prices aren’t collapsing you would have a real surge in housing activity. Some parts of the market are blocked up with foreclosures and a lot of people are underwater. Even so, when you look at the starts and the low level of existing home sales, it is way below what you would expect.”

MICHAEL GAPEN, SENIOR U.S. ECONOMIST, BARCLAYS CAPITAL, NEW

YORK, NEW YORK: “The stronger-than-expected move in the index combined with upward moves in each of the subcomponents is another indicator to us that housing activity has stabilized following the removal of government stimulus. We look for the housing market to continue to stabilize in the coming months.”

CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF

TOKYO/MITSUBISHI UFJ, NEW YORK:

“Housing has turned the corner. By that we mean, construction was at such a low level that it could not possibly fall any lower. We expect a slow, gradual recovery and this report today reflects that along with an extra boost, finally, from falling mortgage rates the last two months.”

KEN MAYLAND, PRESIDENT. CLEARVIEW ECONOMICS, PEPPER PIKE,

OHIO

“We’ve had a lot of noise in home buying associated with all the incentives. Now we’re getting back to a truer state of the market. It’s not as bad as the numbers we saw earlier this year, as that was largely payback from the incentives. But it’s still sluggish and will be for a long time. You’re probably not going to see any really positive trend until the end of 2011.”

PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO, NEW YORK:

“The October NAHB home builder index was 16, up 3 points from September, was 2 points above expectations and is at a four-month high. To put it into perspective though, 50 is the breakeven line between expansion and contraction so we’re just talking about the degree of weakness at these levels.”

LINDSEY PIEGZA, ECONOMIST, FTN FINANCIAL, NEW YORK:

“This is an overall very strong report. This is one of the largest jumps that we’ve seen in quite some time to the upside. It’s surprising that we’re seeing such a robust number given what is going on in the housing market.

“Looking state by state, there are pockets of growth specifically in middle America, where price appreciation has been going on for several months.

“Those pockets that we continue to hear about, California, Nevada, Arizona, Florida, will continue to plague the national numbers.

“Some very large jumps in the South. The builder respondents jumped just about 100 data points. That means an additional one hundred industry insiders participated in this survey. Overall a very positive report. The first positive report we’ve seen for housing in a while. This certainly is a step in the right direction.”

MARKET REACTION: STOCKS: U.S. stocks were steady at higher levels after the data. BONDS: U.S. Treasury debt prices pared gains after the report. DOLLAR: U.S. dollar showed little initial reaction to the data.

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