Builders are growing more confident over the outlook for the U.S. housing market, according to data released today.
Builders’ confidence in the housing market has reached a five-year high, according to the July Housing Market Index released today by Wells Fargo and the National Association of Home Builders. The index jumped 6 points – the biggest one-month gain in nearly a decade – and now stands at 35, the highest point since March of 2007.
“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,” Barry Rutenberg, chairman of the National Association of Home Builders, or NAHB, said in a statement. “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.”
Mortgage interest rates continue to decline and, according to the latest data from Freddie Mac, last week averaged 2.86 percent for a 15-year, fixed-rate mortgage, and 3.56 percent for a 30-year fixed-rate mortgage. The low rates combined with depressed prices makes housing the most affordable it’s been since the National Association of Realtors launched its Housing Affordability Index in 1970. The index, which tracks the median home price in relationship to median household income and average mortgage interest rates, rose to a record high of 205.9 in the first quarter of the year.
The spike in homebuilder confidence adds to a growing number reports indicating that the housing market is returning to its more traditional role of leading the economy out of recession, David Crowe, chief economist for the NAHB, said in a statement. “This is particularly encouraging at a time when other parts of the economy have begun to show softness.”
Every component of the Housing Market Index posted gains in July. Confidence over current sales conditions and traffic of prospective buyers each rose 6 points, to 37 and 29, respectively. Sales expectations rose 11 points to 44.
“Builders commented that buyers were more serious and feeling some urgency to act as interest rates remained low but inventory of new homes also remained low,” according to the NAHB “Eye on Housing” blog posted today.
Builders in the Northeast expressed the greatest increase in confidence, an 8-point gain to 36, while those in the Midwest expressed a modest 3-point gain to 34. Confidence in the housing market is the highest in the West, where builders posted a 12-point gain to 44.