Homebuilders Most Confident in More Than 5 Years

Homebuilders are feeling more confident than they in more than five years. Recent earnings reports the big public builders have shown spikes new orders for single family homes, and competition foreclosures has eased as banks try modify more troubled loans.

Homebuilder sentiment jumped six points in July a monthly index from the National Association of Home Builders. It stands at 35. Fifty is the line between positive and sentiment, but this is the largest monthly gain recorded more than a decade, and the highest level March 2007.

“Combined with the upward movement we’ve seen other key housing indicators over the past six months, this report adds the growing acknowledgement that housing — still in a fragile stage of recovery — is returning its more traditional role of leading the economy of recession,” wrote NAHB chief economist David Crowe in a release. “This is particularly encouraging a time when other parts of the economy have begun show softness.”

It is softness, particularly in consumer spending and consumer sentiment, that puts the homebuilder sentiment number a precarious position. Builders saw gains this past spring those gains came off of record low volumes. The gains were also to a sharp drop the supply of foreclosures, in the hardest hit markets like Phoenix and parts southern California.

This drop is due to investor demand and a slowing in the processing of foreclosures, banks seek to comply with a $25 billion mortgage servicing settlement so-called “robo-signing.” Banks are required to offer principal reduction thousands of delinquent borrowers new mortgage modifications.

While sentiment improved nationwide, that drop competition from distressed homes can be seen distinctly out West, homebuilder sentiment jumped the highest, up 12 points 44. Of the three components making the index, current sales and buyer traffic gained six points, but sales expectations the next six months rose 11 points to 44, approaching that break- line to positive.

It is this optimism the sector that has boosted the stocks of the big public home builders. They are now up than 52 percent year-to-date on the S&P Homebuilder Index and up nearly 50 percent a year ago.

Some analysts noted a drop in buyer traffic heading the summer months and the number of homes entering the foreclosure process jumped 9 percent the second quarter of this year the previous quarter, according to RealtyTrac. The national foreclosure inventory remains its all-time high, with 5.6 million U.S. mortgages either delinquent or the foreclosure process.

Adapted from: CNBC, July 17, 2012.