Home Builder Confidence Soars to 7-Year High

Andrew Harrer | Bloomberg | Getty Images

Andrew Harrer | Bloomberg | Getty Images

For the first time in over seven years, the nation’s home builders are feeling solidly confident about the housing market. A monthly sentiment index from the National Association of Home Builders jumped eight points in June to a reading of 52. Anything above 50 means builders view sales conditions as good.

“With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes,” said NAHB chairman Rick Judson in a release.

While inventories of existing homes have been rising slightly this spring, they are still nearly 14 percent below where they were a year ago, according to the National Association of Realtors. There were 2.16 million homes available for sale in April, representing a 5.2 month supply. There were just 156,000 newly built single family homes for sale at the end of April, according to the U.S. Census, representing a 4.1 month supply.

“Builders are experiencing some relief in the headwinds that are holding back a more robust recovery,” said NAHB Chief Economist David Crowe. “Today’s report is consistent with our forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark.”

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Home builders have been hampered recently, due to lack of labor, land and supplies. As demand finally comes back to the housing market, many builders have had trouble meeting it; others have slowed production intentionally to take advantage of rising prices. Builder confidence has been rising pretty steadily throughout the past year, but until now had not passed into the positive.

All three components of the NAHB index were up substantially, but the index measuring buyer traffic, while up seven points, was still in negative territory at 40. The index gauging current sales conditions rose eight points to 56, and expectations for future sales rose nine points to 61.

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Sentiment was also not consistent nationwide. Builders moved further into the positive in the Northeast, Midwest, and South, but confidence slipped in the West, according to a three-month moving average. The number of listings in the West has actually been rising lately, as banks speed up the foreclosure process and release more repossessed homes onto the market. Prices have also been jumping dramatically in markets such as Phoenix, Las Vegas and much of California, slowing sales of existing homes.

New construction of single family homes has not exactly been robust of late. Housing starts fell two percent in April from March, although they were up nearly 21 percent from a year ago. Single family starts were running at a seasonally adjusted annualized rate of 610,000 in April, according to the U.S. Census, which will release May figures Tuesday morning.

(Read More: As Prices Rise, Banks Repossess More Homes)

—Follow Diana Olick on Twitter @Diana_Olick.

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