U.S. homebuilder sentiment hits highest level since Oct. 2005

Sales of new homes jumped 21.2 percent through the first half of 2015

By Alex Veiga
AP Business Writer

U.S. homebuilders are feeling slightly more optimistic about the housing market, nudging their confidence this month to a level not seen since the high-flying days of the housing boom nearly 10 years ago.

The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday rose this month to 62, up from 61 in August. The last time the reading was higher was October 2005 at 68.

Readings above 50 indicate more builders view sales conditions as good, rather than poor. The index has been consistently above 50 since July last year, reflecting a gradual rebound in sales of new homes.

A measure of current sales conditions and builders’ view of traffic by prospective buyers rose this month. But builders’ outlook for sales over the next six months declined slightly.

Sales of new homes jumped 21.2 percent through the first half of 2015, backed by relatively low mortgage rates and solid job growth over the past two years.
Employers added 3.1 million jobs last year and are on pace to add 2.5 million jobs this year. Meanwhile, unemployment has fallen to a seven-year low of 5.1 percent.

Those factors have helped Americans feel more confident about their economic prospects, causing them to return to the housing market that initially sparked the Great Recession in late 2007. But supplies of new and previously occupied homes have been tight, pushing up prices and limiting choices for would-be buyers.

The latest builder index is consistent with the NAHB’s forecast for the U.S. housing market to recover at a steady, modest pace this year. The trade association projects that builders will break ground on about 1.1 million homes this year. Total housing starts have risen 11.3 percent in the first seven months of this year
and were running at a seasonally adjusted annual rate of 1.21 million homes in July, according to the Commerce Department.

This month’s builder index was based on 306 respondents.

Builders’ view of current sales conditions for single-family homes rose one point to 67, the highest reading since November 2005. A measure of traffic by prospective buyers also improved this month, rising two points to 47. That’s the highest level in a year.

Even so, builders’ outlook for sales over the next six months fell two points to 68.

“Our members continue to tell us that they are concerned about the availability of lots and labor,” said Tom Woods, the NAHB’s chairman.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB data.