Homebuilder sentiment climbs to highest since February 2018

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Homebuilder sentiment climbed to the highest level since February of last year as cheaper borrowing costs and a still-sturdy job market lifted measures of prospective buyer traffic, sales and the demand outlook.

The National Association of Home Builders/Wells Fargo Housing Market Index rose 3 points to 71 in October, marking the fourth straight advance and exceeding all but one estimate in a Bloomberg survey of economists, data released Wednesday showed. The last time the gauge increased in as many consecutive months was June-September 2014.

Builder optimism increased in the South, the biggest U.S. region, to a 14-year high, while sentiment in the West was the strongest since the start of 2018.

Thirty-year fixed mortgage rates that are close to three-year lows, helped by a pair of cuts in the Federal Reserve's benchmark lending rate, are offering support to a residential real estate market that slowed in 2018. At the same time, the market remains constrained by lean inventories of affordable properties.

A measure of current home sales rose to the highest since January 2018, while a gauge of prospective buyer traffic was the strongest since February of last year, according to NAHB, a Washington-based trade group with more than 140,000 members.

"The second half of 2019 has seen steady gains in single-family construction, and this is mirrored by the gradual uptick in builder sentiment over the past few months," Robert Dietz, NAHB's chief economist, said in a statement. "However, builders continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy."

The NAHB's index of builder sentiment in the South climbed 3 points to 76, while the gauge of confidence in the western U.S. rose by 7 points, the most since December 2017, to 83. Sentiment slipped in the Midwest and Northeast. The 6-point increase to 76 in the six-month outlook was the largest since December 2016.

Readings above 50 indicate that more builders view conditions as good than poor.

Bloomberg News
Homebuilders Purchase Housing inventory Housing market Mortgage rates NAHB Wells Fargo