As the spring selling season gets underway, U.S. homebuilders’ confidence increased, suggesting that the housing market is gaining some momentum after a slow start to the year.
Homebuilders’ confidence for new single-family homes, as indicated by the National Association of Home Builders (NAHB)/Wells Fargo housing market index (HMI), rose four points to 56 in April from the prior month — the highest so far in 2015. Any reading above 50 on the index indicates good housing conditions.
The increase in the index clearly indicates rising optimism among builders about strengthening housing momentum as the year progresses.
Though the U.S. housing market saw a rough first quarter, sales are expected to pick up when the spring selling season gets in full swing. The season usually warms up in March and sees maximum business through the back-to-school season in September.
The spring selling season generally brings in improving sales trends. Higher job numbers, a reassuring economy, moderating home price gains, affordable interest/mortgage rates, rising rentals, recent federal initiatives to increase mortgage availability and a limited supply of inventory point to an inevitable pickup in the housing market.
As demand stabilized, housing price gains slowed in 2014. This is expected to continue in 2015 too.
Apartment rental rates have continued to move up, making home buying more attractive than renting.
Moreover, since mortgage rates are still below historical levels, housing should remain an affordable option in 2015. Even if mortgage rates rise in the latter half of the year – as is widely anticipated – housing will likely remain reasonable.
To add to the positives, plans from the White House to cut premiums on mortgage insurance should increase mortgage availability and thereby encourage home buying among first-time homebuyers.
With oil prices continuing its downward journey and the economy largely on the mend, the desire to own new homes should get a shot in the arm.
Shares of major homebuilders like PulteGroup Inc. PHM, Lennar Corp. LEN, D.R. Horton, Inc. DHI and Toll Brothers, Inc. TOL rose nearly 1% on Wednesday following the positive data.
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