Home-builder sentiment indicator accelerated in November, hopefully signaling a significant U.S. housing recovery. Still, other indicators show that builders’ optimism is not necessarily backed-up by a strong improvement in sales.
This month, the National Association of Home Builders (NAHB) sentiment indicator climbed to 58. The index shows builders’ confidence in the market for new single-family homes. And it has jumped in September to 59, matching the second-highest level since November 2005, then fell to 54 in October. A reading of the index above 50 indicates most builders view conditions as rather good than poor.
This new found wave of optimism mainly originates in low mortgage rates (about 4 percent) and unemployment at a six-year low.
The confidence index remained above 50 for five consecutive months. This month in the Northeast it hit 51, the first time the region has seen a reading of 50 or above since April 2006.
“Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,” David Crowe, the home builders group’s chief economist, said.
“Growing confidence among consumers is what’s fueling this optimism among builders. Members in many areas of the country continue to see increasing buyer traffic and signed contracts,” NAHB Chairman Kevin Kelly, a home-builder and developer from Wilmington, Delaware, recently declared.
Expectations for sales over the next six month rose to 66 from 64. A measure of traffic from prospective buyers rose to 45 from 41.
However there are still some participants in the market who tend to display a cautious approach to the current state of the house market.
Last month, The Federal Reserve warned that the housing recovery “remains slow.”
Larry Nicholson, chief executive officer at Ryland Group Inc. has said in a statement:
“The recovery is not going quite as quick as we anticipated. I don’t think everybody feels great about the economy.”
According to the Commerce Department, new-home sales had a minor 1.7% rising in the first nine months of 2014 as compared to the same period a year before. And sales of previously owned homes fell 1.7% in September, according to the National Association of Realtors.
At the same time, the modest wage growth and property values climbing made homeownership prohibitively expensive for some first-time buyers.
“Sometimes you might write a contract three times on a house before you get one person to the finish line who can actually buy the house”, Larry Nicholson said.
Allan Merrill, Beazer Homes USA Inc.CEO, told analysts last week:
“Despite favorable demographics and excellent affordability, demand for new homes has been uneven and, over the course of the year, somewhat disappointing,”