Confidence Grows by Tim McLaughlin
Another positive gauge of how well the housing sector is doing is reflected in U.S. home builders’ confidence, which rose this month, with sales expectations rising to the highest level in more than five years, yet another sign the housing market will remain a driving force behind the economic recovery.
The National Association of Home Builders said Wednesday that its housing market index was 44 in May, up three points from April. All three components of the index rose, with builders’ expectations of sales for the next few months hitting the highest level since February 2007.
The results were above expectations. Economists polled by Dow Jones Newswires had forecast the index would rise one point to 43. April’s index was revised downward to a reading of 41 from an originally reported 42.
“Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies,” said Rick Judson, a home builder from Charlotte, N.C., and the group’s chairman.
A reading above 50 in the NAHB index means that more builders view conditions as good rather than poor. The overall gauge hasn’t been in positive territory since April 2006. At the height of the building bubble, readings were in the high 60s and low 70s.
The housing market helped pull the economy into a severe recession, which ended in June 2009. But housing has been a big component of growth of late. Residential fixed investment, which includes home building and household improvements, rose at an annual rate of 12.6% during the first quarter, building on solid gains over the past two years.
Regionally, builder confidence rose in three out the four U.S. regions in May. It jumped 10 points in the Northeast, five points in the Midwest, four points in the South, but fell 11 points in the West.
The index was based on a survey of 290 builders in May.
