US Homebuilder Confidence Rises to Five-Year High

on Jun 20, 2012
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On 18 June 2012, the US National Association of Home Builders (NAHB) announced in a press release that homebuilder confidence in the market of newly-built, single-family homes climbed by one point in June, to the highest level since May 2007. Builder confidence is measured by means of the National

Association of Home Builders/Wells Fargo Housing Market Index (HMI), which rose to 29 from a slightly revised level the previous month. As reported by Bloomberg, the June index result of 29 exceeded the median estimate of 28 in a Bloomberg News survey. The survey in question included estimates from 41 economists, with predictions ranging from 26 to 32.

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The NAHB/Wells Fargo Housing Market Index is derived from a monthly survey which the NAHB has been conducting for 25 years. The NAHB survey measures builder perceptions of current single-family home sales as well as sales expectations for the next six months. In addition, the survey asks builders to rate traffic of prospective buyers.
According to Bloomberg, cheaper properties and record-low mortgage rates are boosting housing demand and encouraging builders to take on new projects. NAHB’s chairman, Barry Rutenberg, who is also a builder from Gainesville, Florida, notes that June’s increase in builder confidence “is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates”.

!m[](/uploads/story/106/thumbs/pic1_inline.png)Bloomberg reports that the Federal Reserve’s latest Beige Book assessment of economic conditions also indicated that residential real estate may be reviving. The Beige Book, which was released on 6 June 2012, notes that activity in the residential real estate market improved in most districts since the previous report. In addition, several districts noted “consistent indications of recovery in the single-family housing market, although the recovery was characterized as fragile.”

In terms of regional builder confidence growth, the June index results were mixed, with the NAHB reporting that two areas of the country posted gains and two posted declines. The confidence measure rose in the Midwest and the West, climbing to 31 and 33, respectively. The Northeast and South were the areas with a registered decline, to 29 and 26, respectively.

Arizona is one of the states where homebuilding revival is observed, with Bloomberg reporting on 20 June that purchases of new houses in Phoenix surged 43 percent in April from a year earlier. Bloomberg quotes Reed Porter, chief executive officer of the Phoenix-based home building company Trend Homes, who expects that his company will build 200 houses in 2012, or twice as many as the previous year. Moreover, in Arizona, single-family home building permits increased with 63 percent in April, as compared to a year earlier.
In addition to the observed confidence growth, Bloomberg also reports that shares of US homebuilders have gained 35 percent in 2012 on account of both an increasing number of orders and improved earnings.

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