Confidence among U.S. homebuilders improves to six-year high

Confidence among U.S. homebuilders climbed in September to the highest level in more than six years, adding to signs of progress in residential construction.

The National Association of Home Builders/Wells Fargo builder sentiment index rose to 40 this month, the highest since June 2006, according to figures from the Washington-based group released today. The median forecast in a Bloomberg survey of economists called for a rise to 38 from August’s 37. Readings below 50 mean more respondents said conditions were poor.

Cheaper properties and borrowing costs at record lows are attracting buyers and bolstering homebuilders such as Toll Brothers Inc. Sluggish progress in the labor market, domestic fiscal uncertainty and limited access to credit remain headwinds for the industry that helped spur the recession.

“The housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” Barry Rutenberg, chairman of the NAHB and a builder from Gainesville, Florida, said in a statement. “Unnecessarily tight credit conditions are preventing many builders from putting crews back to work -- which would create needed jobs -- and discouraging consumers from pursuing a new-home purchase.”

Estimates of 47 economists in the Bloomberg survey ranged from 35 to 40. The gauge, which was first published in January 1985, averaged 54 in the five years leading to the recession that started in December 2007. It reached a record low of 8 in January 2009.

Components Gain

The builders group’s index of present single-family home sales advanced to 42 this month from 38 in August and a measure of buyer traffic increased to 31 from the prior month’s 30. The index of sales expectations for the next six months jumped to 51 from 43, turning positive for the first time since February 2007.

The survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to assess the outlook for the next six months.

Confidence improved among builders in all four U.S. regions, led by the Midwest and West, which both registered readings of 45.

“Against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials,” David Crowe, the association’s chief economist, said in a statement. “Given the fragile nature of the housing and economic recovery, these are significant red flags.”

‘Sustained Demand’

Luxury homebuilder Toll Brothers is seeing “the most sustained demand” it’s experienced in more than five years, Chief Executive Officer Doug Yearley said on an Aug. 22 earnings call.

“Housing is on the mend, and we are very encouraged by our results,” Robert Toll, the Horsham, Pennsylvania-based company’s chairman and co-founder, said on the same call. “We do remain cautious in our optimism, as we believe consumer confidence remains fragile and subject to the impact of negative economic and political headlines.”

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