Confidence Among U.S. Homebuilders Hovers Close To Nine-Year High

homebuilder confidenceConfidence among U.S. homebuilders hovered in December close to a nine-year high, indicating the residential real estate recovery continues to make progress.

While the National Association of Home Builders/Wells Fargo sentiment gauge decreased to 57 this month from 58 in November, readings greater than 50 mean more respondents said conditions were good, the Washington-based group reported today. The median forecast in a Bloomberg survey projected an advance to 59.

The housing market has made gradual improvement this year, helped by mortgage rates below 4 percent and unemployment at the lowest level in six years. A pick-up in wage growth and sustained gains in consumer sentiment will support momentum in the industry into next year as the Federal Reserve considers its first interest rate rise since 2006.

“We are in a slow march back to normal,” David Crowe, NAHB chief economist, said in a statement. “As we head into 2015, the housing market should continue to recover at a steady, gradual pace.”

Estimates (USHBMIDX) in the Bloomberg survey for the homebuilder index ranged from 55 to 61. September’s reading of 59 was the strongest since November 2005.

Builder confidence retreated in three of the four U.S. regions, with the Northeast showing the biggest drop. The Midwest and South also declined, while the West jumped to its highest level since December 2005.

The group’s gauge of prospective buyer traffic held at 45 last month, while the index of current single-family home sales decreased to 61 from 62.


Outlook Gauge

The measure of the six-month sales outlook decreased to 65 in December from 66.

“Members in many markets across the country have seen their businesses improve over the course of the year, and we expect builders to remain confident in 2015,” NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington,Delaware, said in a statement.

Mortgage rates that have steadily declined have supported the housing market this year. The average 30-year, fixed-rate mortgage was 3.93 percent in the week ended Dec. 11, down from 4.53 percent at the start of January, according to data from Freddie Mac in McLean, Virginia.

The slow rebound in residential real estate has baffled some builders.

Progress in the housing market this year has been “perplexing,” with less growth and pricing power compared to 2013, Douglas Yearley, chief executive officer of Toll Brothers Inc., said in a Dec. 10 earnings call.


Pent-Up Demand

“We’ll be there when it comes back, but right now, it’s a little bit confusing,” Yearley said. “This huge pent-up demand is building. Household formations are growing. Population is growing. Interest rates are 4 percent. It is certainly a bit frustrating and confusing.”

More job growth and a pickup in wages will give Americans the means to buy. Payrolls climbed 321,000 in November and followed a 243,000 gain in October that was bigger than originally estimated, Labor Department figures show. Average hourly earnings climbed 0.4 percent from the month before, the most since June 2013.

A Commerce Department report expected today will probably show housing starts rose to a 1.04 million pace in November from a 1.01 million rate a month earlier, according to the median estimate in a Bloomberg survey.


Source:  Bloomberg