While the real estate market is still well below its glory days of the housing bubble, confidence among home builders in the United States reached its highest level in seven years.
After declining for three consecutive months earlier this year, the National Association of Home Builders/Wells Fargo index of builder confidence posted its second straight monthly gain in June. The index jumped 8 points to reach 52, compared to 44 in May. It was the biggest single-month jump in over a decade.
The reading beat the median estimate calling for 45, and topped all 50 forecasts in a Bloomberg survey. Any reading over 50 indicates that more builders view sales conditions as good than poor.
“This is the first time the HMI has been above 50 since April 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases,” said NAHB Chairman Rick Judson, a home builder and developer from Charlotte, N.C. “With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes.”
The NAHB/Wells Fargo Housing Market Index gauges builder perceptions in three areas of the real estate market. The reading for current sales conditions jumped 8 points to 56, while sales expectations for the next six months surged 9 points to 56, its highest level since March 2006. The component gauging buyer traffic increased 7 points to hit 40 in June.
“Builders are experiencing some relief in the headwinds that are holding back a more robust recovery,” said NAHB Chief Economist David Crowe. “Today’s report is consistent with our forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark.”
The three-month moving averages for regional housing market index scores was up across most of the nation. The Northeast and Midwest both edged higher to 37 and 47, respectively. The South gained 4 points to reach a reading of 46. However, the West posted a decline of 1 point to hit 48.
In morning trading, home builder names such as Toll Brothers (NYSE:TOL) and D.R. Horton (NYSE:DHI) both gained about 1.8 percent. Shares of PulteGroup (NYSE:PHM) jumped 2.3 percent. Meanwhile, Home Depot (NYSE:HD) shares edged slightly higher.
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