Homebuilders finally feel more positive: Index up 2 points

After sitting tight for four straight months, confidence among U.S. homebuilders improved in June. A monthly survey of builder sentiment from the National Association of Home Builders (NAHB) rose two points to 60. Anything above 50 is considered “positive” sentiment.

“Builders in many markets across the nation are reporting higher traffic and more committed buyers at their job sites,” said NAHB Chairman Ed Brady, a homebuilder and developer from Bloomington, Illinois. “However, our members are also relating ongoing concerns regarding the shortage of buildable lots and labor and noting pockets of softness in scattered markets.”

Construction on a single family home in Tiskilwa, Illinois.

Daniel Acker | Bloomberg | Getty Images
Construction on a single family home in Tiskilwa, Illinois.

June’s reading is the highest since January of this year but the same as June of 2015. Of the index’s three components, all posted gains. Current sales conditions rose one point to 64, sales expectations in the next six months increased five points to 70. Buyer traffic rose three points to 47, but it is still the only component in negative territory.

“Rising home sales, an improving economy and the fact that the HMI gauge measuring future sales expectations is running at an eight-month high are all positive factors indicating that the housing market should continue to move forward in the second half of 2016,” said NAHB chief economist Robert Dietz.

Homebuilders have benefited from very short supply of existing homes for sale nationwide, but their costs continue to rise, and they are passing those on to buyers in the form of higher prices. Sales of newly built homes jumped dramatically in April, as did prices. The median price of a newly built home hit $321,100, up 9.7 percent year-over-year to the highest level on record.

Regionally, looking at a three-month moving average, homebuilder sentiment rose two points in the South to 61 and one point in the West to 68. Sentiment in the Northeast dropped two points to 39 and in the Midwest it fell one point to 57. A monthly read of housing starts and building permits for May is set to be released Friday at 8:30 a.m. ET.

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