U.S. Home-Builder Confidence Hits Near-Decade High National Association of Home Builders’ index at highest level since November 2005
By
Anna Louie SussmanThe Wall Street Journal
Updated Aug. 17, 2015 11:59 a.m. ETWASHINGTON—A gauge of home-builder sentiment rose to its highest level since November 2005, reflecting growing confidence in a steadily improving U.S. housing market.
An index of builder confidence in the market for new single-family homes rose one point to a seasonally adjusted level of 61 in August, the National Association of Home Builders said Monday. A reading over 50 means most builders generally see conditions as positive.
The index stood at 60 in July and June. Economists surveyed by The Wall Street Journal expected a reading of 61 in August.
The index has been positive for the past year, following five months in early 2014 when sentiment hovered in negative territory.
“The fact the builder confidence has been in the low 60s for three straight months shows that single-family housing is making slow but steady progress,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. He added that some home builders reported difficulty accessing land and labor.
In June,
sales of existing homes hit their strongest pace since February 2007, the National Association of Realtors said last month. Newly built single-family home
sales fell in June by 6.8% to their lowest reading since November 2014, according to Commerce Department data.
”The overall message from the survey…is very upbeat,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a client note. “We see nothing here to change our view that a real recovery in the housing market is finally under way.”
Joshua Shapiro,chief U.S. economist at the economic consultancy MFR, Inc., observed that the index’s level was similar to its level in early 2006, when single-family housing starts “were running at over a 1.5 [million] unit rate, or more than twice what they are now.”
“So, there remains a big disconnect between what home builders are saying and what they are actually doing,” he wrote.
The index of builder sentiment began to diverge with single-family housing starts in 2011. The
gulf between sentiment, which has skyrocketed, and slowly rising single-family housing starts, has only widened since then.
The July existing-home sales figure will be released Aug. 20, and new-home sales data will be released Aug. 25.
With the Federal Reserve expected to raise interest rates as early as September, economists said potential homeowners are hoping to get into the housing market before mortgage rates rise and mortgages get more expensive.
The labor market has been strengthening, with
employers adding an average of 235,000 jobs a month in the past three months. Unemployment is at 5.3%, its lowest level in more than seven years. And as
rents have risen in many cities, purchasing a home becomes more appealing for those with the means to do so.
The current-sales component of the index rose this month to 66 from 65 in July. Expectations for sales over the next six months stayed steady at 70. A measure of traffic from prospective buyers rose two points to 45.
The three-month moving average of the builders gauge by region posted gains in August in three out of four areas from the prior month’s revised figures, and the Northeast stayed constant at 46. The West and Midwest each gained three points, to 63 and 58, respectively. The South rose by two points to 63.
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