21 July 2018

Home-Builder Confidence Rises Sharply

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Confidence among U.S. home builders rose briskly this month, an early sign the housing market is picking up after a lackluster winter. The National Association of Home Builders’ confidence index climbed four points to a reading of 56 in April, the industry group said Wednesday. A reading above 50 means most builders generally hold a favorable view of the market for newly built, single-family homes.

Economists surveyed by The Wall Street Journal had expected an April confidence reading of 55. The report, based on a survey of builders, showed that traffic of prospective buyers remains weak, at a reading of 41 this month. But builders’ view of present sales rose three points to 61. And their expectations for sales over the next six months climbed five points to 64, the highest level since December.

The pickup in confidence comes after a recent surge in new-home sales. The government reported home sales rose in February to a seven-year high. Many home builders have reported a strong start to the spring selling season.

The combination of rising sales and confidence could lead builders to step up construction of homes, which would create jobs, boost sales of materials, and stoke the economy. However, new-home construction has remained choppy throughout the recovery even when builder confidence has run high.

New-home sales are about a tenth of the housing market. Sales of previously owned homes, the bulk of the market, picked up in February but haven’t reached their pace of late last year, and they remain far weaker than late 2013.

The weakness comes despite historically low interest rates and a recent stretch of strong job creation. And the housing market faces headwinds: Job growth slowed last month and the U.S. economy has lost momentum since last summer. Mortgage rates are expected to rise if and when the Federal Reserve raises short-term interest rates, expected to occur later this year. Higher home prices may be preventing many buyers from qualifying for a mortgage.

Click here to access the full article on The Wall Street Journal. 

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