It looks as though the U.S. housing market can’t disappoint these days. That latest readings on builder confidence, home prices and existing home sales all pointed to further healing in the sector.
The National Association of Home Builders reported that its confidence survey rose to 46 in November from 41 in October – a six-year high, and sailing past expectations for a reading of 41, according to Bloomberg News.
Of course, confidence still has a lot of room to improve: The survey had readings above 70 during in 2005. But the improvements over the past year have been stunning. In September 2011, the survey languished below 15.
There’s good news on home sales as well. Existing home sales in October rose to 4.79 million at a seasonally adjusted, annualized pace, up 2.1 per cent from September. Distressed sales held steady at 24 per cent over September, but the percentage has fallen by four points over last year. And the inventory of unsold homes has declined to 5.4 months from 5.6 months in September.
The only sign of disappointment, if you can call it that, is in the stock market. Home building stocks have been leading the S&P 500 throughout the year, but have lost some momentum recently. The S&P 500 home builders index is at the same level today as it was in mid-September. Before recovering on Friday and Monday, it had fallen about 13 per cent from its post-recovery high in September, falling harder than the broader market and conforming to the popular definition of a correction.
Even on Monday, despite the upbeat housing-related reports, homebuilders weren’t exactly rallying: The homebuilders index was up 1.1 per cent in late-morning trading, lagging the 1.5 per cent gain for the broader S&P 500.
Meanwhile, economists sound mostly upbeat about the backdrop. Here are a few reactions.
David Onyett-Jeffries, Royal Bank of Canada: “While maintaining the standard caveat that housing activity remains depressed relative to pre-recession norms, the residential real estate market has seen considerable progress over the last year and the combination of shrinking inventories and firming prices support the view that the improvements are expected to continue over the forecast horizon as market conditions continue normalize.”
Krishen Rangasamy, National Bank Financial: “There is room for further gains in home prices and construction spending given the multi-low inventories as suggested by the months supply of homes which now stand at a 6-year low for existing homes and a 7-year low for new homes.”
Sal Guatieri, BMO Nesbitt Burns: “But the all-important first-time buyer purchased a relatively low 31 per cent share of homes, down from 32 per cent the prior month and 34 per cent a year ago. Stronger job growth and easier lending standards would help here.”