U.S. home builders said they became more optimistic this month about the market for single-family homes, a sign of rising demand for new residential construction that could boost the broader economy.
The National Association of Home Builders housing-market index increased six points from the prior month to a seasonally adjusted 65 in September, the trade group said Monday. The August reading was reduced to 59 from a previously reported 60. A number over 50 indicates more builders view conditions as good than poor.
Economists surveyed by The Wall Street Journal expected a September reading of 60. The actual reading of 65 was the highest since October 2015, when it also was 65. The gauge hasn’t been higher than that level since October 2005.
Builders are more likely to begin projects when they are confident. A rise in construction would introduce more homes into a tight market while also boosting employment and spending on materials. A pullback in fixed residential investment during the second quarter was a drag on overall U.S. growth.
Sales of newly built single-family homes, which account for only about 10% of homebuying activity, rose in July to their highest level since October 2007, according to the Commerce Department. But sales of previously owned homes, which account for the bulk of the market, slipped 3.2% in July from the prior month as inventory remained tight and prices stayed high, according to the National Association of Realtors.
“With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them,” the NAHB’s chief economist, Robert Dietz, said in a statement.
The home-builder sentiment gauge has hovered in a narrow range since late 2015, staying between 58 and 62 from last November through August. September’s jump, if sustained, could signal stronger momentum heading into the fall, though the relationship between home-builder confidence and actual construction has been tenuous in recent years.
Monday’s report showed a measure of builders’ views about the present market jumped to 71 this month from 65 in August. An index of their outlook for the market over the next six months rose to 71 from 66. A third component, measuring traffic of prospective buyers, rose to 48 from 44.
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