Confidence among homebuilders rebounded in November as low interest rates and a strengthening job market helped boost sales.
The National Association of Home Builders/Wells Fargo builder sentiment gauge advanced to 58, matching the second-highest level since 2005, from 54 in October, figures from the Washington-based group showed today. The median forecast in a Bloomberg survey called for the index to rise to 55.
Mortgage rates that are hovering near 4% and unemployment at a six-year low are giving more Americans the confidence to enter the market. At the same time, wage growth has been lackluster and property values have climbed, making homeownership prohibitively expensive for some first-time buyers.
“Growing confidence among consumers is whats fueling this optimism among builders,” NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington, Del., said in a statement. “Members in many areas of the country continue to see increasing buyer traffic and signed contracts.”
Readings greater than 50 mean more respondents report good market conditions. This month’s gauge is just short of the nine-year high of 59 reached in September.
Estimates in a Bloomberg survey of 50 economists ranged from 52 to 57.
The homebuilder group’s index of current single-family sales increased to 62 in November from 57. A gauge of prospective buyer traffic climbed to 45 from 41, while the six-month sales outlook rose to 66 in November from 64.
Builder confidence increased in all four regions, led by a surge to 51 from 39 in the Northeast.
The housing market has been supported by borrowing costs near historic lows. The average 30-year, fixed-rate mortgage was 4.01% in the week ended Nov. 13, down from 4.35% a year earlier, according to Freddie Mac.
The challenge for builders has been rising prices and stricter lending standards, particularly for first-time buyers. “It’s tough for those folks to get a loan,” Larry Nicholson, chief executive office at Ryland Group Inc., said at a Nov. 13 conference. More than 30% of business at the Westlake Village, Calif.-based builder is entry-level buyers, he said.
“Sometimes you might write a contract three times on a house before you get one person to the finish line who can actually buy the house.”
“The recovery is not going quite as quick as we anticipated,” he said. “I don’t think everybody feels great about the economy.”
A Commerce Department report tomorrow is projected to show housing starts were little changed at a 1.03 million pace in October from a 1.02 million rate a month earlier, according to the median estimate in a Bloomberg survey.