US Housing market index reaches five-year high levels
WASHINGTON - After a pause, sales of newly built single family homes has picked up to levels five years back, pointing to improved buyers sentiments and upward trend in housing construction sector, according to the National Association of Home Builders (NAHB).
Home builder's confidence in the market for newly built, single-family homes gained five points in May from a downwardly revised reading in the previous month to reach a level of 29 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), according to NAHB survey report released Wednesday.
This is the index's strongest reading since May 2007.
Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor."
The survey by the Washington based industry lobby also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Each of the index's components rebounded from declines in the previous month.
The component gauging current sales conditions and the component gauging traffic of prospective buyers both rose five points each in May to 30 and 23, respectively, with the traffic component hitting its highest level since April of 2007.
The component gauging sales expectations in the next six months rose three points to 34. The gauge exceeded the highest projection in a Bloomberg News survey in which the median estimate was 26. Readings below 50 mean more respondents said conditions were poor.
In the case of NAHB survey, three out of four regions registered improving builder sentiment in May. This included a six-point gain to 32 in the Northeast, and five-point gains to 27 and 28 in the Midwest and South, respectively. The West posted a two-point decline, to 29.
"Builders in many markets are reporting that buyer traffic and sales have picked up after a pause this April," said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Florida.
"It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase," he stated.
Though home building activity still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend at 2007 levels is seen as an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back.
Stated NAHB Chief Economist David Crowe, "The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices."
Companies such as building products maker Ply Gem Holdings Inc. are benefiting as cheaper homes and mortgage rates at a record low combine to boost demand.
While foreclosures remain a hurdle for the industry three years after the end of the last recession, Federal Reserve Governor Elizabeth Duke said Tuesday that there are indications the "tepid" real estate market is on the mend.
Tuesday's report showed gains in measures of current single-family home sales, the outlook for the next six months and buyer traffic.
"Although our first-quarter sales and earnings improved over the prior year, overall conditions in the housing market continue to be challenged", the industry report states. Among the major challenges are the "foreclosures that still need to be absorbed through the system."
"The fragile U.S. economy and consumer confidence; high levels of unemployment and tight lending standards are among other factors weighing on the outlook, said Gary Robinette, CEO of the Cary, N.C.-based company, during a May 11 conference call with analysts.
Work on apartment projects also is getting a lift as the foreclosure crisis turns more Americans into renters.
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