Housing starts in U.S. rose in May to 914,000 annual rate

Builder Optimism

Builders remain optimistic as well. A measure of builder confidence climbed in June to its highest level since March 2006, a National Association of Home Builders/Wells Fargo index of builder confidence showed yesterday. The gauge rose to 52 from 44 in May, according to the Washington-based group.

“A lot of us are expecting that we need 1.6 million to 1.9 million housing starts to keep up with population growth,” Brad G. O’Connor, chief accounting officer at Red Bank, New Jersey- based builder Hovnanian Enterprises, said in a June 13 presentation. “Housing creation shows that we should still have a fair amount of pent-up demand and an ongoing recovery to the housing market, that we’re just in the beginning of that recovery.”

Recent gains have been enough to encourage those in home construction. The National Association of Home Builders/Wells Fargo index surged to 52 in June from 44 in June, its highest level since March 2006, as builders became more confident about the future, the group reported this week.

Ryland Homes

Among companies benefiting is Ryland Group Inc., a West Lake Village, California-based homebuilder that reported first- quarter profit for the first time in six years.

“There is no market that is not active today, which is another good sign,” Chief Executive Officer Larry T. Nicholson said in a June 13 presentation. “There’s a huge opportunity for demand that’s sitting on the sidelines that can’t buy a house today, because they have some ding on their credit.”

For those who can get loans, The Fed’s efforts to keep mortgage costs low have helped spur demand. The central bank has been buying assets at an $85 billion monthly pace, including $40 billion in mortgage-backed securities, to bolster growth and reduce the jobless rate.

Chairman Ben S. Bernanke said on May 22 that the central bank could scale back stimulus efforts should the economy show sustained improvement. The Federal Open Market Committee begins a two-day meeting policy today in Washington and will release its new rate decision and outlook on the economy tomorrow afternoon.

The recovery in housing is spreading beyond builders to companies such as furniture and décor retailer Restoration Hardware Holdings Inc.

“We believe everybody probably in the home is being affected by the good news and the rebound of the housing market,” said Gary Friedman, chairman emeritus to the Corte Madera, California-based company, in a June 13 earnings call.

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