After hovering in a tight range since early February, sentiment among the nation's home builders surged ahead in June and is now one point shy of crossing into positive territory on the National Association of Home Builders/Wells Fargo Housing Market Index. Confidence jumped four points to a reading of 49; 50 is the line between positive and negative territory.
"After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. "However, builders are facing strong headwinds, including the limited availability of labor."
Consumer confidence in the housing market is also still struggling, as potential home buyers face higher home prices and tighter underwriting standards on home loans. There is also a significant dearth of homes for sale, both new and existing. Home builders have not ramped up production to meet demand and are still operating at about half the monthly starts of historical averages.
"Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase," said NAHB chief economist David Crowe. "Builders are reacting accordingly, and are moving cautiously in adding inventory."
Of the three NAHB index components, all posted gains, but the largest was in current sales, which rose 6 points to 54, crossing back into the positive range. The component gauging sales expectations in the next six months rose three points to 59 and buyer traffic increased 3 points to 36, still the weakest component of the index.
Regionally, on a three-month moving average, home builder sentiment is strongest in the South and West, while weakest in the Northeast. The Midwest was the only region to see a drop in builder confidence.