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Wednesday, December 19, 2012

Home Builder Confidence Highest Since 2006

The news just keeps getting better in the housing market. Although we have a very long way to go, we are finally make genuine strides to get out of the very deep hole we dug for ourselves.

When housing improves, everything else related to consumer spending tends to improve as well. So while the hard times aren't over, the tide is definitely turning in a favorable direction. It's about time.

Home-builder confidence highest since 2006 tells the good news story:

A gauge of confidence among home builders rose in December to the highest level since April 2006, with respondents encouraged by declining inventory and good sales conditions, a trade group said Tuesday.

The National Association of Home Builders/Wells Fargo Housing Market Index rose two points to a seasonally adjusted level of 47 — matching estimates from analysts polled by MarketWatch — from a downwardly revised 45 in November. . . .

Despite eight months of gains, the confidence gauge remains below the key reading of 50. Readings over 50 indicate that more builders see sales conditions as good than poor.

“One thing that is still holding back potential home sales is the difficulty that many families are encountering in getting qualified for a mortgage due to today’s overly stringent lending standards,” said Barry Rutenberg, NAHB’s chairman and a Gainesville, Fla., home builder.

Indeed, the housing sector still faces substantial challenges from tight credit conditions and persistently high unemployment. However, Tuesday’s report is the latest indicating that the sector has bottomed out and is strengthening.

“This report fits nicely with our view that the turn in housing is real but getting too bullish on the sector would be a mistake,” said Steven Ricchiuto, chief economist with New York-based Mizuho Securities USA.

Along with increasing sentiment among builders, there have also been recent gains in prices, sales and new construction, though levels remain relatively low. Meanwhile, mortgage rates hover near record lows, with the 30-year fixed-rate mortgage averaging 3.32% in the week ending Dec. 13, according to Freddie Mac. . . .

While confidence readings have more than doubled over the past 12 months, new construction of single-family homes is below levels historically associated with current levels of sentiment among builders. . . .

Looking forward, David Crowe, NAHB’s chief economist, said he expects continuing growth.

“While there is still much room for improvement, the consistent upward trend in builder confidence over the past year is indicative of the gradual recovery that has been taking place in housing markets nationwide and that we expect to continue in 2013,” Crowe said. "

Summing Up

While happy days aren't here again, the worst is definitely over for housing.

That's a very good sign that our economy will continue to stengthen in the years to come.

And that the unemployment rate should be headed lower over time as well.

Then deficits will shrink and our nation's fiscal condition will improve as government spending for recession related programs becomes much less of a drain on the economy.

Albeit slowly, we're finally headed for better days.

At least that's my take.

Thanks. Bob.

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