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US Builder Confidence Climbs to 7-Month High in August: NAHB

H.S. Borji
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US homebuilder confidence reached a seven-month high in August, as a rapidly improving labour market continued to boost sales conditions.

The housing market index, courtesy of the National Association of Home Builders, increased two points to 55. A median estimate of economists anticipated no change this month. A reading above 50 indicates more builders are optimistic about sales conditions.

All three of the index’s main components increased in August. The gauge of current sales conditions increased two points to 58, the highest since January. The index tracking future sales expectations increased two points to 65, a one-year high. The gauge of buyer traffic increased three points to 42.

Builder confidence was up in two of the four major regions, led by a 13-point advance in the Midwest. Confidence also increased in the Northeast. It declined in the South and West, NAHB data revealed today.

“Builder confidence appears to be firming following an uneven spring,” said NABH chief economist David Crowe in a statement. “Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand.”

According to Freddie Mac, the average 30-year, fixed mortgage-rate for the week ended August 14 was 4.12 percent, down from 4.53 percent at the start of the year.

Builder confidence in July had advanced to a six-month high, as the housing market index surpassed the 50-mark that separates positive sentiment from negative for the first time since the start of the year. The index has been gradually improving since declining ten points in February on weather-related woes.

“As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market,” said NAHB chairman Kevin Kelly in a statement. “However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished lots and labor.”

US employers added 209,000 nonfarm payrolls in July, which marked the sixth consecutive month job growth was above the 200,000 mark. However, a stronger labour market has yet to translate into meaningful improvements in the housing market, which struggled to gain traction in the second quarter.

US new home sales tumbled 8.1 percent in June to a 406,000 annual pace, the fewest since March, the Commerce Department reported last month. Meanwhile, the May estimate was revised down by a record, painting a troubling picture of the housing market.

On Tuesday the Commerce Department will report on housing starts and building permits for the month of July.

Housing starts are forecast to rebound sharply to a seasonally adjusted annual rate of 970,000. Starts fell 9.3 percent in June to an 893,000 unit pace, official data showed.

Building permits – a gauge of residential and non-residential construction intentions – are forecast to increase to a seasonally adjusted annual rate pace of 1 million. Building permits declined 4.2 percent to 963,000 in June.

The National Association of Realtors will release data on existing home sales on Thursday. The sale of previously-owned US homes is forecast to fall 0.4 percent in July to a seasonally adjusted annual rate of 5.04 million.

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