David Paul Morris/Bloomberg

Here's Proof Homebuilders are Betting on a Pickup in the Housing Market

Higher confidence and more permits show builders are optimistic about housing

Homebuilders have caught spring fever.

Confidence among U.S. builders, measured by the National Association of Home Builders/Wells Fargo sentiment gauge, increased in April for the first time in five months. The group's measure of the sales outlook for the next six months climbed to the highest level since December, while a gauge of prospective buyer traffic also rose.

With the housing market posting only middling progress in recent months, the fact that construction companies are optimistic is a good sign, especially heading into the crucial spring-selling season. The period usually starts in mid-February, with deals picking up the following months as the weather warms.

What's more encouraging, though, is that builders seem to be putting money where their mouths are.

The annualized rate of new housing authorized by building permits outpaced that of new home construction by 205,000 units in February, Commerce Department data show. That's the widest gap between plans for building and actual construction since January 2007, according to data compiled by Bloomberg.

The data may be proof that homebuilders really are confident about the industry even as a harsh winter stalled growth. After all, while bad weather and cold temperatures can stop builders from starting work on a house, it probably won't stop them from pulling a permit.

"Spring is really the critical time for construction activity, and year after year now we've been hoping for the best," said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. "We may be finally seeing a decent pickup in the housing sector."

We'll get March data on permits and starts Thursday at 8:30 a.m. from the Commerce Department. Housing starts are forecast to rebound to a 1.04 million pace from an 897,000 rate in February, according to the median forecast in a Bloomberg survey of economists. Building permits are projected to cool to a 1.08 million pace from 1.1 million the prior month.

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