Home Builder Stocks Jump After Confidence Report
Despite lingering high levels of unemployment and tight credit, home builder confidence in the single-family home market increased to its highest level in over four years, according to a new survey released on Wednesday. Although the index is far from a recovery level, home builder companies are welcoming the news with open arms.
Home builders such as PulteGroup Inc. (NYSE:PHM) and Ryland Group Inc. (NYSE:RYL) jumped nearly 2 percent after the confidence on the National Association of Home Builder’s monthly sentiment index increased 4 points to 29. The index is composed of three components, which all improved for a fifth consecutive month. The WSJ reports, “Builders’ assessment of traffic from potential buyers, current sales conditions, and builders’ expectations for sales over the next six months all reached the highest point since mid-2007.”
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“This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” said NAHB Chief Economist David Crowe. “However, it is important to remember that the HMI is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.”
Although the home builder confidence index grew to 29 from 25 in January and beat estimates of 26, the index is well below 50, which represents a line between positive and negative sentiment. Each individual component of the index is also well below 50. Furthermore, record low interest rates continue to fail to spur home buying demand. Reuters reports, “The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, dipped 1.0 percent in the week ended Feb 10.”
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Home builder stocks rose across the board as traders decided to focus on improvement in the sentiment. Companies such as D.R. Horton, Inc. (NYSE:DHI) and Lennar Corp. (NYSE:LEN) increased .40 percent and 1.3 percent, respectively. Meanwhile, shares of KB Home (NYSE:KBH) and Beazer Homes USA, Inc. (NYSE:BZH) jumped 2.9 percent and 4.2 percent, respectively. Sherwin-Williams Company (NYSE:SHW) also appears upbeat about the future picture in housing, as it announced a 7 percent increase in their quarterly dividend.
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