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Economic Watch: Homebuilder Optimism Near 9-Year High

January 20, 2015

By Evan Lockridge

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Builder confidence in the market for newly built single-family homes declined just one point to 57, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday.

This marks the third straight month that the index has hovered in the upper 50s range while it also remains near a nine-year high.

“After seven months above the key 50 benchmark, builder sentiment is reflecting the gradual improvement that is occurring in many markets throughout the nation,” said NAHB Chairman Kevin Kelly.

The report comes the day before the federal government releases new housing starts figures for December. In November, single-family starts fell 5.4% from the month before but were more than 8% higher in the first 11 months of the year than compared to the same time in 2013. Overall home starts for November, which include multi-family units, fell 1.6%.

The HMI component gauging current sales conditions remained unchanged at 62 in January while the index measuring expectations for future sales dropped four points to 60 and the component gauging traffic of prospective buyers fell two points to 44.

“January’s HMI reading is in line with our forecast as we head into the new year,” said NAHB Chief Economist David Crowe. “Steady economic growth, rising consumer confidence and a growing labor market will help the housing market continue to move forward in 2015.”

Looking at the three-month moving averages for regional HMI scores, the West rose by four points to 66, the Midwest registered a three-point gain to 57 and the Northeast was up two points to 47. The South dropped two points to 58.

Despite the continued good feelings by homebuilders, the housing sector has remained one of the most sluggish sectors or the U.S. economy, said Sterne Agee Chief Economist Lindsey Piegza.

“With home price appreciation rapidly outpacing income growth, many Americans, particularly the youngest of generations, are being squeezed out of the housing market, unable to accumulate the needed wealth to make a down payment, let alone afford the monthly mortgage payment,” she said. “Longer term, a resurgence of demand for housing will remain dependent on not just job creation, but high-wage, full-time job creation.”

 

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