Confidence among U.S. homebuilders unexpectedly dropped in February from a more than six-year high, a sign the real-estate market will take time to accelerate.
The National Association of Home Builders/Wells Fargo builder confidence index fell to 46 from January’s 47 that matched the highest reading since April 2006, a report from the Washington-based group showed today. The median forecast in a Bloomberg survey of 50 economists called for a rise to 48. Readings lower than 50 mean more respondents said conditions were poor.
Faster gains in employment and income and easier access to credit are needed to foster a stronger rebound in the industry that was at the center of the 2008 financial crisis. At the same time, rising sales at companies like PulteGroup Inc. and Lennar Corp. show near record-low mortgage costs are attracting buyers, putting a floor under demand.
“Following solid gains over the past year, builder confidence has essentially leveled out,” Rick Hudson, chairman of the National Association of Home Builders and a builder from Charlotte, North Carolina, said in a statement. “This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit,” along with “rising costs for building materials.”
Estimates in the Bloomberg survey ranged from 46 to 50. The index, which was 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 fell to 51 this month from a revised 52 in January. A measure of sales expectations for the next six months climbed to 50 from 49. The gauge of buyer traffic decreased to 32, the lowest since September, from a more than six-year high of 36 the prior month.
The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.
Confidence improved among builders in two of the four U.S. regions, led by the Northeast, where it jumped to 41 from 36. Builders in the West saw an increase to 60, the highest since June 2006, from 59. The confidence measure held at 46 in the Midwest and fell to 44 from 51 in the South.
“Having risen strongly in 2012, the HMI hit a slight pause in the beginning of this year as builders adjusted their expectations to reflect the pace at which consumers are moving forward on new-home purchases,” David Crowe, the association’s chief economist, said in a statement. “We expect home building to continue on a modest rising trajectory this year.”
PulteGroup, the largest U.S. homebuilder by market value, said orders rose 27% in the fourth quarter from the same time a year earlier, while Lennar reported a 32% gain.
Toll Brothers Inc., the largest U.S. luxury-home builder, is among companies looking to garner more sales as builders gear up for the spring selling season, traditionally viewed as starting the weekend after the National Football League’s Super Bowl. The event was held Feb. 3.
“All signs point to a very good spring,” Chief Executive Officer Doug Yearley said in a January interview, citing the number of visitors to Toll Brothers model homes and the amount of closings.
Demand may be outstripping supply, contributing a rising prices. New listings in 21 of the largest U.S. cities plunged 21% in January from a year earlier, according to Redfin, a Seattle-based brokerage.
At the same time, declining mortgage costs are making it cheaper to buy a home for those who qualify for credit. The average fixed rate on a 30-year loan held at 3.53% in the week ended Feb. 14, down from 3.87% a year ago, according to McLean, Virginia-based Freddie Mac.