Confidence among U.S. homebuilders held in January at the highest level in more than six years, offering the latest evidence that residential real estate will help spur economic growth.
The National Association of Home Builders/Wells Fargo index of builder confidence was 47, matching December’s reading as the highest since April 2006, the Washington-based group reported today. The median forecast of 50 economists projected a reading of 48.
Stronger sales and affordable borrowing costs are driving traffic for lenders such as Wells Fargo & Co. Climbing property values and household formation may continue to underpin progress in returning residential real estate to pre-recession levels.
“Fundamentals indicate continued momentum in housing this year,” NAHB Chief Economist David Crowe said in a statement. “However, persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals and the ongoing stalemate in Washington over critical economic concerns continue to impede the housing recovery.”
Estimates in the Bloomberg survey ranged from 46 to 50. The index, first published in January 1985, averaged 54 in the five years leading to the recession that began in December 2007. It reached a record low of 8 in January 2009.
The builders group’s index of present single-family home sales held at 51 in January. A measure of sales expectations for the next six months fell to 49 from 50. A gauge of buyer traffic climbed to 37, the highest since April 2006, from 36.
The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and gauge prospective buyers’ traffic. It also asks participants about the outlook for the next six months. A reading below 50 means more respondents reported poor conditions. The main index hasn’t been above that line since April 2006.
Confidence among builders rose in two of four regions, led by the surge in the West, which reached the highest level since June 2006. The South reached the break-even 50 level, while sentiment fell in the Northeast and Midwest.
Cheaper borrowing costs are attracting home buyers who have adequate credit. The average rate on a 30-year fixed purchase loan was 3.40% in the week ended Jan. 10, compared to 3.89% a year ago, according to McLean, Virginia-based Freddie Mac.
Lenders such as San Francisco-based Wells Fargo are benefitting from an increase in homebuyer traffic as the housing market that triggered the recession is showing further signs of healing.
“The housing market began a steady rebound during 2012,” Chief Executive Officer John Stumpf said on a Jan. 11 conference call. “While many measures of activity and prices remain low by historical standards and a complete recovery will still take some time, there is no doubt that a corner was turned.”
A Commerce Department report tomorrow might show that housing starts climbed in December to the highest since July 2008 after easing in the prior month. Builders broke ground on houses at an annual rate of 890,000 last month, up from 861,000 in November, according to the Bloomberg survey median.