Homebuilder confidence in U.S. rises to a seven-year high

Confidence among U.S. homebuilders surged in June to the highest level in seven years, reflecting gains in sales as Americans rushed to take advantage of low mortgage rates.

The National Association of Home Builders/Wells Fargo index of builder sentiment rose 8 points, the biggest monthly increase since September 2002, to 52 during the month, the Washington-based group reported today. The reading, the highest since March 2006, exceeded all 50 forecasts in a Bloomberg survey in which the median was 45. Readings above 50 mean more respondents said conditions were good.

“Builders are experiencing some relief in the headwinds that are holding back a more robust recovery,” David Crowe, the group’s chief economist, said in a statement. “Today’s report is consistent with our forecast for a 29% increase in total housing starts this year.”

Low mortgage rates, a strengthening job market and limited inventories are benefiting builders including PulteGroup Inc. and Lennar Corp. as the housing market contributes to growth this year after emerging as a bright spot in 2012. Gains in housing will help the world’s largest economy move through a global slowdown that is hurting manufacturing.

A report today showed manufacturers in the New York region felt more optimistic in June even as orders, sales and employment dropped, indicating the area’s factories are looking beyond the current slowdown in growth.

Empire State

The Federal Reserve Bank of New York’s general economic gauge, known as the Empire State index, climbed to 7.8 this month, the highest reading since March, from minus 1.4 in May. Readings of greater than zero signal expansion in New York, northern New Jersey and southern Connecticut. The median projection in a Bloomberg survey of 51 economists called for a reading of zero.

Estimates in the Bloomberg survey for the homebuilder index ranged from 42 to 47. 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.

Builder shares rallied after the report. The Standard & Poor’s Supercomposite Homebuilding Index of 11 companies gained 2.4%. The S&P 500 Index climbed 1% to 1,643.12 at 10:10 a.m. in New York.

The confidence survey asks builders to characterize sales as good, fair or poor and to gauge prospective buyers’ traffic. It also asks participants to assess the six-month outlook.

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