Confidence among U.S. homebuilders climbed for a sixth straight month in October, adding to signs the real-estate market is healing.
The National Association of Home Builders/Wells Fargo builder sentiment index increased to 41 this month, the highest since June 2006, from 40 in September, according to figures from the Washington-based group released today. The median forecast in a Bloomberg survey of economists called for an increase to 41. Readings below 50 mean more respondents said conditions were poor.
Record-low borrowing costs are helping sustain sales for homebuilders such as Hovnanian Enterprises Inc. (HOV:US) Strict credit standards and slowing payroll growth remain obstacles for the industry that was at the center of the financial crisis.
“Many builders are reporting increases in the number of serious buyers visiting their sales offices,” Barry Rutenberg, chairman of the NAHB and a builder from Gainesville, Florida, said in a statement.
Estimates of 49 economists in the Bloomberg survey ranged from 40 to 43. The gauge, which was first published in January 1985, averaged 54 in the five years leading to the recession that started in December 2007. It reached a record low of 8 in January 2009.
An index of single-family home sales was unchanged at 42 this month. A measure of buyer traffic jumped five points to 35, its highest level since April 2006.
The survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to assess the outlook for the next six months.
Confidence improved among builders in three of four U.S. regions, falling in the Midwest. The West led gains with a reading of 49, up from 44 in September.
“The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets,” NAHB Chief Economist David Crowe said in a statement.
Hovnanian, based in Red Bank, New Jersey, is among homebuilders seeing gains in sales this year as buyers return to the market.
“We certainly believe the housing market’s recent overall strength and our significant improved sales pace this year indicates that the market for new homes has truly bounced off the bottom,” Larry Sorsby, the company’s chief financial officer, said at an Oct. 4 conference. The market “is already in a period of gradual recovery,” he said.
Mortgage rates near record lows are making it cheaper to buy a home. The average fixed rate on a 30-year loan was 3.39 percent in the week ending Oct. 11, down from 4.12 percent a year ago.
The Federal Reserve’s monetary easing is helping push rates lower as the central banks seeks to spur the three-year economic recovery and push the jobless rate lower. The Fed last month announced a third round of large-scale asset purchases, saying it would buy $40 billion a month in mortgage-backed securities.
“Housing is once more showing signs of life,” John Williams, president of the Federal Reserve Bank of San Francisco, said in a speech yesterday. “The housing recovery includes a rebound in home construction, something particularly important for the health of the overall economy.”
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