Housing starts climbed to a 1.04 million annual rate, the fastest since June 2008, the Commerce Department said last week.
At the same time, builder optimism has faded, reflecting higher costs for raw materials, limited developed land and tight credit conditions. The National Association of Home Builders/Wells Fargo index of builder confidence fell this month to its lowest level since October, data showed April 15.
Builders were still more optimistic about the future, with a gauge of their sales outlook for the next six months increasing to the highest level since 2007.
Mortgage rates hovering near record lows and a healing job market may keep providing a spark for the industry. The average rate for a 30-year fixed mortgage fell to 3.41% in the week ended April 18, the third consecutive drop, according to Freddie Mac. The rate slid to an all-time low of 3.31% in November.
Figures out yesterday from the National Association of Realtors showed previously owned homes sold at a 4.92 million rate in March, down from a 4.95 million pace the previous month.
A lack of inventory of more affordable existing properties has driven up the cost of such homes, making newly-constructed units more attractive to potential buyers. The NAR report showed the median price of an existing home rose 11.8%, the most since November 2005, to $184,300 last month from a year earlier.
Sales of new homes are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. Newly constructed houses accounted for about 7% of the residential market in 2012, down more than 15% before the 2007-2009 recession began.
The strength in housing is spreading to other parts of the economy.
“The majority of the data still points to a robust and sustainable recovery,” Christopher Connor, chief executive officer of Sherwin-Williams Co., said during an April 18 earnings call. “Our sales results in the first quarter support that conclusion.”
Sales at the Cleveland-based company, the largest U.S. paint retailer, rose 1.4% in the first quarter from a year earlier to reach a record $2.17 billion.