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US Builder Confidence Climbs to Highest Level since November 2005: NAHB

H.S. Borji
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US homebuilder confidence reached its pre-recession high in September, as a rapidly improving labour market continued to support expectations for a broad rebound in housing activity.

The housing market index, courtesy of the National Association of Home Builders, increased four points to 59, its highest level since November 2005. A median estimate of economists anticipated a slight increase to 56. A reading above 50 suggests more builders are optimistic about sales conditions.

All three of the index’s main components increased this month. The gauge of current sales conditions increased five points to 63. The index tracking future sales expectations increased two points to 67. The gauge of buyer traffic increased five points to 47.

Builder confidence was up in every region this month, led by a five-point advance in the Midwest. Confidence increased four points in the South, three points in the Northeast and two points in the West, NAHB data showed.

“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” said NAHB chairman Kevin Kelly in a statement.

“While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time home buyers,” added NAHB chief economist David Crowe. “Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor.”

On Thursday the Commerce Department will present data on building permits and housing starts for the month of August.

Building authorizations are forecast to decline 0.7 percent in August to a seasonally adjusted annual rate of 1.045 million, after rising 8.1 percent the previous month. Meanwhile, groundbreaking is forecast to decline 4.8 percent after surging 15.7 percent in July to its highest level since November 2013.

Earlier this month the Commerce Department said overall construction spending increased in July to its highest level in five-and-a-half years, offering further evidence the housing recovery was gradually taking shape after a prolonged slow period.

The value of construction put in place rose 1.8 percent to $981.31 billion, official data showed. Private construction, which represents the majority of spending, increased 1.4 percent to $701.66 billion. Private residential construction was up 0.7 percent to reach $358.1 billion.

The National Association of Homebuilders and the Federal Housing Finance Agency will report on existing home sales and single-family house prices next week, respectively.

The NAR said last month existing home sales increased 2.4 percent in July to 5.15 million.

Meanwhile, single family house prices in the United States rose 0.4 percent in July, the FHFA reported last month.

The Commerce Department will complete the picture on housing next Wednesday with a report on new home sales. The sale of new US homes declined 2.4 percent to 412,000 in July, a sign affordability challenges were keeping would-be buyers out of the new residential housing market.

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