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Confidence among homebuilders increases to nine-month high

🕐 4 min read

WASHINGTON — Confidence among homebuilders rebounded in June to a nine-month high as warmer weather and a brighter economic outlook drew prospective buyers back to the market.

The National Association of Home Builders/Wells Fargo builder sentiment gauge rose to 59 this month, the strongest since September and exceeding all projections in a Bloomberg survey, from 54 in May, figures from the Washington-based group showed Monday. The median survey forecast called for 56.

Activity in the residential real estate market has shown a slow rebound as the busier selling season takes hold, which could help the economy overcome weakness in manufacturing. Employment gains and rising wages are giving would-be homebuyers reason to take the plunge.

The data show “a growing optimism among builders that housing will continue to strengthen in the months ahead,” David Crowe, NAHB chief economist, said in a statement. “At the same time, builders remain sensitive to consumers’ ability to buy a new home.”

Estimates in a Bloomberg survey of 48 economists ranged from 54 to 58. Readings greater than 50 mean more respondents report good market conditions.

Another report Monday showed factory production unexpectedly declined in May as the slump in energy output deepened. The 0.2 percent decrease at manufacturers followed a 0.1 percent increase in April, according to figures from the Federal Reserve in Washington. Total industrial production, which adds mines and utilities, also dropped 0.2 percent.

The builders’ index of current single-family home sales rose to 65 in June, the highest since November 2005, from 58 in the prior month. The homebuilder group’s gauge of prospective buyer traffic climbed to 44, the strongest in five months, from 39.

The measure of the six-month sales outlook advanced to 69, the best since October 2005, from 63 in May.

“Builders are reporting more serious and committed buyers at their job sites and this is reflected in recent government data showing that new-home sales and single-family construction are gaining momentum,” NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Missouri, said in a statement.

Builder confidence climbed in all four regions, led by an 8-point gain in the Midwest, to 57. Sentiment rose in the South to 63, the strongest since September, from 59 in May.

April housing data showed industry momentum was spotty at the start of the spring selling period. Purchases of new homes rose more than projected, increasing 6.8 percent to a 517,000 annualized pace from a 484,000 rate the prior month, according to Commerce Department figures.

Sales of existing homes unexpectedly fell 3.3 percent to a 5.04 million annualized rate after a 5.21 million pace in March that was the strongest in almost two years, National Association of Realtors figures showed.

Warmer weather has bred optimism among Federal Way, Washington-based Weyerhaeuser Co.’s customers.

“We’re seeing some real pickup in terms of demand from a housing perspective,” Chief Executive Officer Doyle Simons said at a June 9 investor forum. “In this time of year things dry up quick and people can get in and build the houses.”

Persistent labor-market progress should help sustain expectations for a pickup in economic activity. Employers added 280,000 jobs in May, the most in five months, after a 221,000 April advance. An increase in the number of people entering the labor force caused the jobless rate to creep up to 5.5 percent from 5.4 percent, which was the lowest since May 2008.

Wage growth also has begun to show signs of life. Average pay for all civilian workers climbed 4.2 percent in the first quarter from the same period in 2014 to $22.88 an hour, Labor Department figures showed Wednesday. That compares with a 4 percent year-over-year gain in the fourth quarter and is the strongest since July-September 2006.

Average hourly earnings reported with the Labor Department’s monthly jobs figures accelerated in May to a 2.3 percent year-over-year pace, the fastest since August 2013.

Relatively cheap borrowing costs also are supporting homebuyers. The average rare on a 30-year fixed mortgage was 4.04 percent in the week ended June 11, according to data from Freddie Mac in McLean, Virginia. That’s still below the average 6.06 percent in the last five years of the economic expansion that ended din December 2007.

A report Tuesday is projected to show housing starts slowed in May from a seven-year high. Builders broke ground at a 1.09 million annualized pace last month, down from a 1.14 million rate in April, according to the median forecast of economists surveyed before figures from the Commerce Department. Starts averaged a 1 million pace last year.

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