Confidence among U.S. homebuilders improved in July from a nine-month low as executives turned less pessimistic on the outlook for sales.
The National Association of Home Builders/Wells Fargo sentiment index climbed to 15 this month, higher than forecast, from 13 in June, data from the Washington-based group showed today. The median projection of economists surveyed by Bloomberg News was for a gain to 14.
“It’s still at a very low level,” Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York, said about the homebuilders’ measure. “In order to see a brighter future for housing, we need to see a stronger economy.”
Builders are facing a backlog of discounted, distressed properties that remain in the foreclosure pipeline and are hesitant to start new projects. Rising unemployment and depressed home values may keep housing one of the weakest parts of the recovery.
Readings lower than 50 in today’s homebuilder measure mean more respondents said conditions were poor. Projections among the 36 economists surveyed ranged from 12 to 16.
The gauge, which was first published in January 1985, reached a record low of 8 in January 2009, and averaged 54 in the five years before the recession began in December 2007.
The builders group’s index of sales expectations for the next six months increased to a three-month high of 22 from 15. A gauge of current single-family home sales rose to 15 from 13. The index of buyer traffic held at 12.
Close to Bottom
“The market continues to bounce along the bottom, with conditions in some locations beginning to improve,” NAHB Chief Economist David Crowe said today in a statement. “The stronger rebound in sales expectations for the next six months likewise marks a return to trend.”
The NAHB confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.
Builders in three of the four regions were less pessimistic this month. In the South, the gauge rose to 17, the highest since March, from 14 a month earlier. The measure also climbed in the West and Midwest.
The Commerce Department may report tomorrow that housing starts rose 2.7 percent in June to 575,000 units at an annual rate, according to economists’ forecasts. New home construction has stabilized since February, when starts fell to the lowest level since April 2009, the weakest on record.
Sales of existing homes, which make up about 95 percent of the market, rose 2.9 percent to a 4.95 million annual pace in June, economists surveyed by Bloomberg forecast the National Association of Realtors may report on July 20. Existing-home sales, while also at depressed levels, have been gaining market share from new homes due to growing demand for lower-priced distressed homes.
Purchases of existing homes reached a record-high 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.
Lender delays in processing home-loan defaults will push as many as 1 million U.S. foreclosure filings from this year to 2012 or beyond, casting an “ominous shadow” on the housing market, according to a report last week RealtyTrac Inc., a housing data provider. A clogged foreclosure pipeline may prevent real estate prices from finding a bottom as the housing slump enters its sixth year.
The S&P/Case-Shiller index of property values in 20 cities fell 4 percent in April from a year earlier, the biggest drop since November 2009, the group said last month. The index was down 33 percent from its peak in July 2006.
Miami-based Lennar Corp. (LEN), the third-largest U.S. homebuilder by revenue, last month reported second-quarter profits that beat analysts’ estimates on rising earnings at its distressed-investing unit.
“While it is now well documented that the expected spring selling season of 2011 simply did not materialize, it is beginning to feel like the worst days of the housing market are getting behind us,” said Stuart Miller, chief executive officer of Lennar, on a June 23 conference call. “Stabilization and recovery will continue to be a slow and rocky process.”
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