Bloomberg News

Homebuilder Confidence Rises to Six-Year High on U.S. Sales

November 19, 2012

Homebuilder Confidence Rises to Six-Year High as U.S. Sales Jump

Partially constructed homes stand in the Vista Heights development, part of a new construction housing development from Ryland Homes in Rancho Cucamonga, California on Sunday. Photographer: Patrick T. Fallon/Bloomberg

Confidence among U.S. homebuilders unexpectedly climbed in November to a six-year high, propelled by the biggest jump in sales in a decade, adding to signs the real-estate market is improving.

The National Association of Home Builders/Wells Fargo index of builder confidence increased to 46, the highest level since May 2006, from 41 in October, figures from the Washington-based group showed today. The median forecast in a Bloomberg survey of 49 economists called for no change. Readings below 50 mean more respondents said conditions were poor.

Companies like Toll Brothers Inc. (TOL:US) are benefiting as more affordable properties and record-low mortgage rates bring buyers into the market. Faster hiring, fewer foreclosures and easier credit would ensure a sustained rebound in the industry that was at the center of the 2008 financial crisis.

“Builders are reporting increasing demand for new homes as inventories of foreclosed and distressed properties begin to shrink in markets across the country,” Barry Rutenberg, chairman of the National Association of Home Builders and a builder from Gainesville, Florida, said in a statement. “Many potential buyers who were on the fence are now motivated to move forward with a purchase in order to take advantage of today’s favorable prices and interest rates.”

Existing Homes

Another report today from the Realtor group showed that sales of previously owned U.S. homes climbed in October. Purchases of existing houses, tabulated when a contract closes, increased 2.1 percent to a 4.79 million annual rate. The median price rose from a year earlier as inventories dropped to the lowest level in almost a decade.

Stocks extended gains after the figures, with the Standard & Poor’s 500 Index rising 1.5 percent to 1,380.72 at 10:20 a.m. in New York.

Estimates for the confidence index in the Bloomberg survey ranged from 37 to 44. The index, which was first published in January 1985, averaged 54 in the five years leading to the recession that began in December 2007. It reached a record low of 8 in January 2009.

The builders group’s index of present single-family home sales advanced to 49 this month, also the highest since May 2006, from 41 in the prior month. The eight-point jump was the biggest since September 2002.

Buyer Traffic

The gauge of buyer traffic was unchanged at 35. A measure of sales expectations for the next six months rose to 53, the highest since February 2007, from 51.

The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.

Confidence improved among builders in three of the four U.S. regions, led by the Midwest, where the gauge jumped to 51 from 40 in October. Builders in the South and West also reported increases. Confidence in the Northeast fell to 31 from 32.

The survey was taken in the two weeks following superstorm Sandy, which came ashore Oct. 29 in the Northeast, killing more than 100 people, disrupting rail and subway service, and leaving more than 8 million homes and businesses without power for days.

The report “therefore does reflect builder sentiment during that period,” the group said in a statement.

Luxury Homes

Toll Brothers, the Horsham, Pennsylvania-based luxury homebuilder, is among companies citing signs that the market has turned and will probably keep improving.

“We’re in a strong phase of the recovery,” Martin Connor, chief financial officer, said during a conference presentation on Nov. 15. “It’s a function of five years of pent-up demand being released,” and “ affordability and rising prices is also spurring people to buy.”

Declining mortgage costs are making it cheaper to buy a home. The average fixed rate on a 30-year loan dropped to a record-low 3.34 percent in the week ended Nov. 15, down from 4 percent a year ago, according to McLean, Virginia-based Freddie Mac data going back to 1971.

A Commerce Department report tomorrow may show that housing starts fell in October after reaching a four-year high the prior month. Builder broke ground on 840,000 houses at an annual rate last month, down from 872,000 in September, according to the Bloomberg survey median.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • TOL
    (Toll Brothers Inc)
    • $32.41 USD
    • -1.05
    • -3.24%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus