A report yesterday showed confidence among U.S. homebuilders climbed in June to a five-year high. The Washington-based National Association of Home Builders/Wells Fargo index of sentiment rose by 1 point to 29, the highest since May 2007.
Cheaper homes, low mortgage rates and enough of an increase in household income drove housing affordability to an all-time high in the first quarter, according to the National Association of Realtors.
The average rate on a 30-year, fixed-rate mortgage reached a record low of 3.67 percent in the first week of June, according to Freddie Mac.
Another reason for optimism on the outlook for construction is that Americans are forming households faster than new homes are being built, said Douglas Yearley, chief executive officer of Toll Brothers Inc., a luxury homebuilder based in Horsham, Pennsylvania.
“There is huge pent-up demand that has built over the last four years from this imbalance,” Yearley said at a June 14 conference. “It’s been seven years since this all began to turn down and you have people that are just ready to move on with their lives, take advantage of great interest rates.”
At the same time, three years after the end of the recession, a stronger housing recovery remains elusive. More distressed properties are going on the market, adding to inventory and pushing down prices.
Foreclosure starts grew in May on an annual basis for the first time since January 2010, after the largest U.S. loan servicers settled with states over faulty documentation, according to a report last week from RealtyTrac Inc., a real estate data provider in Irvine, California. Home seizures plunged 18 percent from a year earlier, the report also showed, a sign that banks are turning to repossession alternatives, RealtyTrac Inc. said today.
Weak job gains and stock market volatility also have consumers apprehensive about taking on debt.
“Our forecast is still for growth but we’re being conservative about it,” said Doug Duncan, chief economist at Washington-based Fannie Mae. “This will definitely be a year where we’ll see growth in the housing market.”