Home Builder Sentiment and Home Construction Numbers Rise

The subject of real estate has managed to be at the top of national economic discussions for several years, and now builder sentiment and home construction is on the rise.

Nearly four years after the resounding burst of the housing bubble, the state of real estate continues to dominate discussions about the national (and global) economy. Central to the discussions? Homebuilders, whose harsh march through the recent recession has set the tone for a slow and arduous economic recovery. Recent data, however, suggests that changes may be looming in the world of new home construction, and home builders may well be poised for a new recovery phase in housing.

One barometer of the new homes market, the National Association of Home Builders’ (NAHB) Housing Market Index, is a gauge of builder expectations that takes into account the current market environment for detached single-family homes. July’s reading, released on Monday, showed a slight uptick from June, to stand at 15. A reading over 50 suggests a positive selling environment. The index has stood under 50 since May of 2006, and the nearly five years of indices readings since that date are the lowest in 25 years.

Although positive outlooks are hard to come-by for some builders, some clearly positive news was received Tuesday regarding home construction, which showed a clear pick-up in June. With an increase of 14.6 percent in activity from May, and an increase of 16.7 percent over June 2010, signs are pointing toward an increasing consumer demand. The new home construction numbers, released monthly by the U.S. Census Bureau and HUD, showed a seasonally-adjusted annual construction rate of 624,000; while the number is an improvement over the prior month, it is still far short of the 1.2 million annual rate considered by economists to reflect a healthy housing market.

The true single-family homes sales season—which tends to run strongly from the end of the holidays until sometime in February—had a disappointing show this year, marking a new bottom in home sales activity since the tracking of new home sales began in 1963. New home sales figures for June 2011 will be released next week, along with data from the National Association of Realtors covering pending home sales in the month of June.

Real Estate Market