Homebuilder Sentiment Rises in June

As Americans are starting to feel more optimistic about purchasing homes, homebuilders are feeling hopeful about their sales. This is a welcome relief after a weak start to the spring home-selling season. During that time both parties were concerned about their prospects in the housing market. A recent article from The Seattle Times discusses the causes and importance of this positive change in sentiment among both groups.

How can we determine a rise in sentiment among home buyers and homebuilders? People have always understood the benefits of home ownership, so while the desire and demand have been constant, many factors deterred potential homeowners from investing in real estate. Lately we’ve seen that steady job gains and low mortgage rates are encouraging those people to buy new homes with less risk. That drives home construction and helps support the economy. This is where homebuilders come in (feeling optimistic).

Though new homes represent a small fraction of the housing market, they have an outsized impact on the economy. According to data from the National Association of Home Builders (NAHB), each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue. While we could just assume that new, steady jobs boost morale, the NAHB/Wells Fargo have an index that actually quantifies builder sentiment. Readings above 50 indicate more builders view sales conditions as good rather than poor. As of last Thursday, the reading was at 60, which is the highest it’s been since January.

Although the housing market has yet to recover from the consequences of the downturn a decade ago, rising sentiments prove that we are making progress. According to Robert Dietz, the NAHB’s chief economist, the latest builder survey results indicate that the housing market “should continue to move forward in the second half of 2016.” That makes us feel pretty optimistic, too.

Read the full article at The Seattle Times.