Bloomberg News

Homebuilder Confidence in U.S. Holds at Highest Level Since 2005

September 17, 2013

Homebuilder Confidence in U.S. Holds at Highest Level Since 2005

Ken Isaacson, co-owner of Bullington Isaacson Construction, looks over a blueprint during construction of a single family home outside Tiskilwa, Illinois, on Sept. 6, 2013. Photographer: Daniel Acker/Bloomberg

Homebuilder confidence held in September at the highest level in almost eight years, a sign housing will remain a bright spot for the U.S. economy.

The National Association of Home Builders/Wells Fargo confidence index registered 58 this month, matching August’s revised reading as the strongest since November 2005, a report from the Washington-based group showed today. Readings greater than 50 mean more builders view conditions as good than poor.

“Following a solid run up in builder confidence over the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the headwinds of tight credit, shrinking supplies of lots for development and increasing labor costs continue,” David Crowe, the association’s chief economist, said in a statement.

Companies including Hovnanian Enterprises Inc. (HOV:US) have said the recent rise in mortgage rates will temporarily restrain the housing recovery rather than end it. While work orders from the past few months will probably sustain construction gains, faster growth in hiring and wages are needed to spur bigger increases in demand.

The median forecast in a Bloomberg survey of 51 economists projected a reading of 58. Estimates ranged from 55 to 61. 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.

Less Inflation

Another report today showed the cost of living rose less than forecast in August, a sign it will take time for inflation to reach the Federal Reserve’s goal. The consumer-price index increased 0.1 percent, the least in three months, after a 0.2 percent gain in July, Labor Department figures showed.

The builders group’s index of present sales of single-family homes held at 62 this month, matching the highest since January 2006. A measure of sales expectations for the next six months declined to 65 from 68. The gauge of buyer traffic increased to 47, the highest since October 2005, from 46 the prior month.

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 all four U.S. regions, led by a jump to 45 from 39 in the Northeast. The gauge for builders in the Midwest climbed to 66, the highest in monthly records going back to December 2004.

Weighting Impact

The regional gauges can all show gains while the national measure is little changed because of the weightings used to calculate the data, a spokesman for the group said in an e-mail.

Residential real estate “increased moderately,” helping to contribute to the economic expansion from early July through late August, the Fed said in its Beige Book survey released Sept. 4. The central bank’s officials are meeting today and tomorrow to consider whether to scale back monthly asset purchases.

The rate on 30-year home loans averaged 4.57 percent in the week ended Sept. 12, close to the highest level since July 2011, according to Freddie Mac data. The rate, which had been as low as 3.81 percent at the end of May, has been rising since Fed Chairman Ben S. Bernanke that month indicated the central bank may slow purchases of government and mortgage bonds.

The advance in mortgage costs is unlikely to halt the nation’s housing recovery, Red Bank, New Jersey-based Hovnanian said. The company reported a profit for its fiscal third quarter as net contracts climbed 1.8 percent and the contract backlog, an indication of future sales, jumped 18 percent to 2,893 homes.

The company is confident any hesitancy from its customers caused by the jump in borrowing costs “will be a temporary bump in the road to housing recovery,” Chief Executive Officer Ara Hovnanian said on a Sept. 9 conference call with analysts.

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

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


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Companies Mentioned

  • HOV
    (Hovnanian Enterprises Inc)
    • $4.3 USD
    • -0.02
    • -0.47%
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