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US Builder Confidence Increases in June: NAHB

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US Builder Confidence Increases in June: NAHB

US homebuilder confidence increased in June, but remained slightly below the threshold for what is considered good building conditions.

The Housing Market Index, courtesy of the National Association of Home Builders, increased four points to 49. A median estimate of economists called for a reading of 47. The 50 level separates positive sentiment from negative.

The index plunged ten points in February, as inclement weather resulted in a sharp decline in buyer traffic and overall activity.

The NAHB said homebuilders still face “strong headwinds,” including a lack of qualified labour power and a hesitant consumer market.

“Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase,” said NAHB chief economist David Crowe in a press release. “Builders are reacting accordingly, and are moving cautiously in adding inventory.”

All three of the index’s main components increased this month. The gauge of current sales conditions rose 6 points to 54. The component measuring sales expectations in the next six months rose from 56 to 59. The measure of buyer traffic increased from 33 to 36.

Regionally, only the Midwest posted a decline in builder confidence. The three-month average for the Midwest HMI score fell from 47 to 46. The South and Northeast each posted a one point advance to 49 and 34, respectively, while the West held steady at 47.

Builder sentiment has declined this year due to lot shortages, unmet demand for skilled labour and declining sales. On the consumer side, rising mortgage rates and higher house prices have weighed on affordability, keeping many potential buyers out of the market.

With mortgage rates forecast to rise, an improving job market will be relied upon to uphold the housing recovery. US nonfarm employers added 217,000 payrolls in May, as employment passed its pre-recession peak and the jobless rate fell further to 6.3 percent. Average earnings, which have run stagnant in recent months, advanced 0.2 percent.

Year-on-year, average earnings were up 2.1 percent.

US employers have added an average of 234,000 nonfarm payrolls the past three months, supporting the view the labour market was back on track after a weak first quarter. Job creation soared to a two-year high in April, as employers added 282,000 payrolls.

The Commerce Department will report on housing starts Tuesday. May housing starts are forecast to drop to a seasonally adjusted annual pace of 1.036 million.

The National Association of Home Builders will report on existing home sales next Monday.

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