U.S. homebuilder confidence unexpectedly rose in November to its highest level since May 2010. The National Association of Home Builders/Wells Fargo index of builder confidence rose to 20 in November, up from a downwardly revised 17 in October, the Washington-based group said today.
Though November’s reading shows slight improvement, readings below 50 mean more respondents said conditions were poor than thought conditions were favorable.
Still, if today’s numbers are any indication, the Federal Reserve’s attempts to spur demand, coupled with record low borrowing costs, may finally be having a positive impact on the housing market. However, the prospect of more foreclosed properties returning to the market and competing with new construction means a sustained rebound could still be years away.
“The trends are pretty flat but not getting worse, so builders may be less depressed,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, ahead of the report. “We expect there will be some marginal improvement at best, helped by lower mortgage rates.”
The group’s index of current single-family home sales rose to 20 this month, its highest level since May 2010, while a measure of sales expectations for the next six months advanced to 25, the highest since March. A gauge of buyer traffic increased to 15, also the best reading since May 2010.
The index for builders in the Midwest jumped eight points to 23 this month, its highest since March 2007. The South climbed two points to 21, while the Northeast climbed from 14 to 17. Confidence in the West dropped from 21 to 15.
“Well-qualified buyers in select areas are being tempted back into the market by today’s extremely favorable mortgage rates and prices,” said NAHB Chief Economist David Crowe. “We are anticipating further, gradual gains.”
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The NAHB survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks builders to gauge the outlook for the next six months.