U.S. homebuilder sentiment improved in December, rising to its highest level in a year and a half and reinforcing the view the housing market is slowly healing.
The National Association of Home Builders/Wells Fargo Housing Market index rose to 21 from a downwardly revised 19 in November, the group said on Monday. Economists polled by Reuters predicted a reading of 20.
It was the third monthly gain in a row and put the index at its highest level since May 2010. November was originally reported at 20.
While builder confidence remains low, the consistent gains registered over the past several months are an indication that pockets of recovery are slowly starting to emerge in scattered housing markets, NAHB Chairman Bob Nielsen said in a statement.
After stagnating in a tight range for about a year, the index has been improving since October, giving weight to analysts' views that the housing market is finally finding a bottom.
Even with December's gain, home builder sentiment is still historically low and well below the 50 mark, indicating more builders view market conditions as poor than favorable. The index has not been above 50 since April 2006.
We're not looking for numbers next year to come anywhere close to the kind of numbers that we saw pre-recession, but we do think the housing market is setting up for a plus year in 2012 in terms of new home construction, as well as sales, said Steve Blitz, senior economist at ITG Investment Research in New York.
The current sales component rose to 22 from 20, while the gauge of sales expectations for the next six months rose to 26 from 25.
There was little impact in financial markets from the data as investors focused on developments in the euro zone and uncertainty following the death of North Korean leader Kim Jong-il.
The beleaguered housing market is one of the main hurdles for the economic recovery as a glut of inventory and little buying demand has kept pressure on prices.
Even as analysts are optimistic housing could see signs of life next year, revisions to home sales data later in the week are expected to show the housing market has been much weaker than previously thought.
The National Association of Realtors will be revising down figures for sales of previously owned homes from 2007 through October 2011 because of double counting.
How much impact the new data has will depend on how steep the revisions are, said Blitz.
A drop of 10 to 20 percent would put the NAR's figures back in line with other data, according to IFR Markets, a unit of Thomson Reuters.
Other data later in the week is forecast to show new residential construction and existing home sales ticked up in November.
(Reporting By Leah Schnurr; Editing by Padraic Cassidy)