Home Builder Confidence Reaches Five-Year High

The National Association of Home Builders reported Monday that confidence among its members hit its highest level since May 2007 so far in June. The preliminary reading of the group’s gauge of builders’ outlooks on the housing sector, compiled jointly with Wells Fargo, gained a single point from May’s reading of 28. While the index has reached a level not seen since 2007, before the worst of the recession hampered numerous parts of the economy, including the home construction sector which is so critical to overall economic health.

The NAHB/Wells Fargo builder sentiment index is calculated in a range of 0 to 100, with the number being equal to the percentage of total respondents who view the market as negative than positive. Hence, the reading of 29 seen in this month’s early reading indicates that 71 percent of the builders that took part in the survey view the nation’s current housing sector conditions as poor. The index has remained well below the halfway point between positive and negative optimism ever since the housing bubble began to burst in early 2006, eventually fueling the worst economic downturn in the US since the Great Depression.

Even though builders are still mostly negative on the market, most housing market observers viewed this month’s modest gain as a positive sign showing definite, if tepid, improvement is going on somewhere. Other recent data suggest improvement, as well, including recent gains in building permits, mortgage applications and continued historically low interest rates that contribute to the some of the most affordable buying conditions ever. In addition, sales of both new and existing homes surged to their highest levels in nearly two years, despite a slowdown in job growth over the last few months