Homebuilder Confidence Surges in July

Homebuilder Confidence Surges in July

Photo credit: Joe Wolf

Are Inventory Increases Around the Corner?

The National Association of Home Builders (NAHB)/ Wells Fargo Housing Market Index reports that builder confidence in the market hit a major milestone in July, rising four points to a reading of 53 and showing favorable sales conditions.

“This is the first time that builder confidence has been above 50 since January and an important sign that it is strengthening as pent-up demand brings more buyers into the marketplace,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“An improving job market goes hand-in-hand with a rise in builder confidence,” said NAHB Chief Economist David Crowe. “As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home.”

This report comes from a monthly survey the NAHB has conducted for 30 years. It measures builder perceptions of current single-family home sales and sales expectations for the next six months using parameters such as “good,” “fair” or “poor.”

This is welcoming news in a housing industry environment where affordability, job growth and inventory issues threaten to stall any recovery efforts.

See The Delicate Relationship between Housing and the Economy

The most recent jobs report show that there was a hiring surge in June. This continues the upward hiring trend but the labor market still has room for bigger improvements.

“The jobs report was positive overall, showing that the pace of hiring continues a solid upward trajectory. The string of five consecutive monthly gains averaging more than 200,000 was the best performance since late 1999,” said Fannie Mae Chief Economist Doug Duncan. “However, not all is rosy, especially from the Federal Reserve’s perspective. The labor force participation rate remains at depressed levels last witnessed during the 1970’s. In addition, despite the improved pace of hiring, wage gains remain weak, implying the persistence of considerable slack in the labor market.”

If builder confidence continues and we see big increases in home building, this may have a positive effect on inventory by releasing a lot of pent up demand for housing, especially in the lower priced tier market.

See Housing for Sale but Not for First Time Home-buyers


National Association of Homebuilders. “Builder Confidence Surpasses Key Benchmark in July” 16 July 2014. http://www.nahb.org/news_details.aspx?sectionID=134&newsID=16933

Housing Wire. “NAHB: Homebuilder confidence reaches 6-month high” 16 July 2014. http://www.housingwire.com/articles/30669


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