Building a solid recovery

More good news for the housing recovery — builders are gaining confidence

There’s a new buzz of optimism among builders these days. With inventories down, home sales on the rebound and interest rates still hovering at the bottom, home starts are picking up steam. So is builder confidence.

“We are seeing an uptick in sales velocity, starting to see an uptick in prices and also seeing a significant decrease in inventory, all good factors pointing to the strengthening of the housing market going forward,” says Marty Paris, president of Sedgwick Properties, a development corporation in Chicago.

In July, new home sales rose 3.6 percent to a seasonally adjusted rate of 372,000 units, according to the U.S. Census Bureau. That’s the fastest sales rate in more than two years, according to the National Association of Home Builders.

Although housing production was down 1.1 percent, builders requested more permits for new home projects than they have in any month since August 2008.

Another happy sign: inventory levels were at a historic low last month with 142,000 new homes for sale.

“That’s the lowest it’s been in the 50 years of collecting data,” says David Crowe, chief economist at NAHB. “So this continued optimism and improvement in new home sales lead us to believe that we will see more construction.”

The fastest improving markets are the ones that took the minimal hit during the bust. Callie Stevens, president of Stevens Construction in Midland, Texas, says that in the last two years, new and existing home prices in the city climbed 25 percent.

“The market’s only problem is we don’t have available lots,” she says. “We have developers working as fast as they can.”

These trends have triggered a new sense of optimism among builders. Builder confidence for new, single-family homes had a two-point gain, rising to 37 in August, according to the NAHB/Wells Fargo Housing Market Index. That’s the highest level since February 2007. The measure that gauges sales expectations in the next six months climbed to 44.

“What’s happening is builders are reflecting the confidence that we are beginning to see in consumers,” Crowe says. “There’s a lot of pent up demand with people delaying purchases. That wait is finally over for some.”

— Madhusmita Bora

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