Homebuilders' confidence, as indicated by the National
Association of Home Builders (NAHB)/Wells Fargo housing market
index, rose 2 points to 55 in August - the highest level since
January and the third consecutive monthly gain for the index.
The index reflects much better sales expectations in the
upcoming quarters as demand for new homes increases with an
improving job market. Any reading on this index above 50 indicates
good housing conditions.
The housing slowdown that began in the second half of 2013
worsened as the harsh winter in the December quarter delayed
construction, raising serious doubts regarding the strength of the
Moreover, shortage of lots and skilled labor, rising cost of
materials and declining inventory of new homes were not making
things easier for the builders. Also, the spike in mortgage rates
and rising home prices were hurting demand which further added to
the woes. As a result, many companies witnessed declining order
trends in the December quarter.
However, as the winter chill subsided, several homebuilders
recorded improving order trends in the March quarter. Order trends
improved sequentially for D.R. Horton Inc. (
), PulteGroup, Inc.(
), Toll Brothers, Inc. (
) and Ryland Group, Inc. (
However, the spring selling season turned out to be softer than
expected slowing order growth on a sequential basis for large
homebuilders like Lennar Corp. (
) and Pulte in the Jun 2014 quarter.
Also, some negative housing reports around that time suggested
that home buyers might be skeptical of making home purchases.
Pending home sales, new home sales (single-family houses), housing
starts as well as building permits declined in June from the prior
However, the positive homebuilder confidence data raises hope
that the housing sector might well be gathering steam. With a range
of housing numbers expected later this month, the picture should
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