The National Association of Home Builders/Wells Fargo housing-market index reached 58 this month — matching an eight-year high hit in August — up from 54 in November. Economists polled by MarketWatch had expected a December level of 56. Results above 50 signal that builders, generally, are optimistic about sales trends.
“In short, the report suggests that the recovery in home sales is getting back on track,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
Part of December’s improvement is a rebound from the government shutdown that hit housing, said David Crowe, NAHB’s chief economist.
“We continue to look for a gradual improvement in the housing recovery in the year ahead,” Crowe said.
NAHB’s overall builder-confidence gauge increased 23% over the past year, supported by pent-up demand, even as mortgage rates trended higher. In fact, the gauge rose so much that it’s at higher levels than those typically associated with current construction rates.
Looking at the components of builder confidence, the gauge of present sales of single-family homes rose to 64 in December — the highest since 2005 — from 58 in November. Meanwhile, the gauge of single-family-home sales over the next six months rose to 62 from 60. And a barometer of prospective-buyer traffic picked up to 44 from 41.
If the economy continues to add jobs at a brisk pace, economists say there should be enough demand for the housing market to strengthen in 2014. And it could be easier for borrowers to obtain loans as lenders, which have seen plunging applications to refinance, are looking to make more revenue from purchase mortgages. Plus, there could be more opportunity to buy if builders, encouraged by rising prices, speed up production, and more homeowners become able and willing to place their homes on the market.
Still, the housing-finance system is in somewhat of a state of flux with new mortgage rules, and plans to lower limits for government-backed mortgages. Plus, U.S. lawmakers are working on housing-finance reform, adding one more element of uncertainty.
Source: Market Watch