- October 1, 2014
- Posted by: AGreer
- Category: Market Conditions
Confidence among U.S. homebuilders rose in September to a nine-year high, showing the industry is gaining ground and will be a source of momentum for the economy.
The National Association of Home Builders/Wells Fargo sentiment measure climbed to 59 exceeding the highest estimate in a Bloomberg survey of economists, from 55 in August, the Washington-based group reported today. Readings above 50 mean more respondents said conditions were good.
Improvement in the job market and low interest rates spurred buying interest this month, as the group’s index of foot traffic through model homes jumped to the highest level since October 2005. Faster wage gains would provide extra momentum for residential real estate, which has seen lackluster demand from first-time buyers.
“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” Kevin Kelly, NAHB chairman and a builder and developer in Wilmington, Delaware, said in a statement.
The median forecast in the Bloomberg survey of 46 economists for the builder sentiment gauge, which is the highest since November 2005, called for a gain to 56. Estimates ranged from 53 to 58.
Builder shares advanced after the report, with the Standard & Poor’s Supercomposite Homebuilding Index rising 3.9 percent at 10:44 a.m. in New York.
Today’s report also showed purchases and sales expectations increased this month. The measure of the six-month sales outlook climbed to 67, the highest since August 2013, from 65 in August.
An index of current single-family home sales rose to 63, the highest this year, from 58, while the group’s gauge of prospective buyer traffic advanced to 47 from 42.
Builder confidence increased in three of four U.S. regions, led by a 12-point jump in the South to 63, the highest since January 2006. Sentiment also advanced in the West and Northeast.
Hovnanian Enterprises Inc., a Red Bank, New Jersey-based homebuilder, is looking for further improvement as the broader economy picks up.
“The housing market has certainly improved dramatically compared to where it was in the trough of the market in 2009, but this year’s sales pace has been choppy,” Chief Executive Officer Ara Hovnanian said in a Sept. 4 earnings call. “Future improvements in the housing economy — in the U.S. economy — including the creation of better-paying jobs will be beneficial to household formations, which will ultimately benefit the homebuilding industry.”
The economy has added an average of 215,000 jobs per month through August, according to Labor Department figures, more than the 194,250 average last year. The unemployment rate has fallen to 6.1 percent from 6.6 percent at the start of the year.
Borrowing costs have declined this year. The average 30-year, fixed-rate mortgage was 4.12 percent in the week ended Sept. 11, down from 4.53 percent at the start of January, according to data from Freddie Mac in McLean, Virginia.
Slower home-price gains are another positive development for the industry, because they could enable more people to enter the market. The S&P/Case-Shiller index of property values in 20 cities climbed 8.1 percent from June 2013, the smallest 12-month gain since January 2013, the group reported last month.
Today’s homebuilder sentiment report is the first in a series of housing data in the coming days. A report tomorrow from the Commerce Department is projected to show builders broke ground on 1.04 million homes at an annualized rate in August after a 1.09 million pace a month earlier, according to the median forecast in a Bloomberg survey. Data on August existing-home sales are due Sept. 22.