Homebuilder sentiment up in September as sales improve

Alex Veiga
Associated Press

Confidence among U.S. homebuilders has surged to the highest level in nearly a year, reflecting a brighter outlook for sales now and into 2017.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday climbed six points this month to 65 following a downwardly revised reading of 59 in August.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been mostly at 58 since rising to 61 in January. The last time it reached 65 was October last year.

The latest index beat analysts’ expectations, which called for a reading of 60, according to FactSet.

Builders’ view of current sales and a gauge of traffic by prospective buyers rose. Their outlook for sales over the next six months also increased.

A strengthening job market and mortgage rates hovering near all-time lows have helped stoke demand for homeownership, pushing up sales of new and previously occupied homes. That, in turn, has been good news for homebuilders.

“With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them,” said Robert Dietz, the NAHB’s chief economist.

New home sales accelerated 12.4 percent in July to a seasonally adjusted rate of 654,000 annual units, the strongest level since October 2007. Sales in July roughly matched the long-standing pace of 650,000 new homes selling each year.

Meanwhile, average long-term mortgage rates remain near their all-time low of 3.31 percent set November 2012. The average for the 30-year fixed-rate mortgage rose last week to 3.5 percent, the highest level since June, according to mortgage giant Freddie Mac.

Still, builders continue to face growing competition for workers and real estate.

“Though solid job creation and low interest rates are also fueling demand, builders continue to be hampered by supply-side constraints that include shortages of labor and lots,” Dietz noted.

This month’s builder index was based on 334 respondents.

A measure of current sales conditions for single-family homes jumped six points to 71, while builders’ view of sales over the next six months increased five points to 71. A gauge of traffic by prospective buyers rose four points to 48.

The index found builder sentiment improved in the Northeast, South and West. The Midwest held steady.