Homebuilder Confidence Experiences Largest One-Month Gain in a Decade

A new report shows homebuilder confidence experienced its largest one month gain in a decade and shows the Home Price Index reaching its highest point since March of 2007.

Homebuilder confidence rose six points in July, its steepest one-month increase in over a decade, according to a new report from the National Association of Home Builders.  The report shows the Home Price Index reaching its highest point since March of 2007.

Similar findings appear in a report from the Commerce Department released last week. According to their findings, the pace of construction in single-family and multifamily houses jumped to a level not seen since October of 2008.

Housing starts in June soared 6.9 percent, reaching a seasonally adjusted annual rate of 760,000 units. Broken down, single-family home construction, which makes up the largest segment of those new housing starts, increased 4.7 percent in June. Multifamily housing starts, considered a volatile segment of the market, jumped 12.8 percent last month. Housing starts were nearly 24 percent higher in June compared to last year at that time.

“Housing continues to be the one sector of the U.S. economy that is outperforming expectations,” Michael Gapen, an economist at Barclays, told Reuters.

Findings from the National Association of Home Builders’ report echoed the suggestion the building slump might be finally waning. The key housing market index gained six points in July, increasing to 35. This is the largest one-month gain recorded by the index in nearly a decade, and brings the HMI to its highest point since March of 2007.

The index evaluates builders’ perception of strength when it comes to single-family home sales in the United States.

The indices measuring current sales conditions and prospective homebuyer traffic rose six points to 37 and 29, respectively, on the index. In addition, the index measuring sales expectations for the next six months rose 11 points to a score of 44.

Any number over 50 suggests the majority of builders view conditions in a particular segment of the market as “good”.

“Builder confidence increased by solid margins in every region of the country in July as views of current sales conditions, prospects for future sales and traffic of prospective buyers all improved,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable.”

Fitch Ratings views the report as highly optimistic when it comes to the fate of homebuilders.

The ratings agency believes single-family housing starts will improve by at least 12% while new home sales will rise 10.5%.

“Housing growth should be slightly more robust next year,” Fitch said. “Single-family starts should expand 14%, while new home sales advance 12%.”

Posted in RE News.

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