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Builder Confidence Surges to 7-Year High in June

Builder confidence surged eight points in June to 52, its highest reading since March 2006, the ""National Association of Home Builders "":http://www.nahb.org/news_details.aspx?sectionID=134&newsID=16341 (NAHB) reported Monday.


It was the first positive (above 50) reading for the association├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós Housing Market Index (HMI) since April 2006. Economists had expected the index to move to 45 from the unrevised May reading of 44.

Two of the three components of the index--builder assessment of current sales and of sales six months in the future--were also positive. The current sales index rose eight points to 56, and the future sales index jumped nine points to 61.

The index measuring buyer traffic rose seven points to 40.

For all three components, the June reading was the highest since March 2006.

The increase in the total index was led by a record 13-point jump in the Midwest to 57, the highest level ever recorded in the region. The previous high had been 55 in March 2004. The index also jumped a record nine points in in the South to 53--the highest since April 2006--and nine points to 50 in the West. The index slipped one point to 39 in the Northeast.

All three components improved in the same month for the second time in a row; the last time all three gained in the same month was last July.

The improvement in the national index followed the most recent Census Bureau/HUD report on new homes sales, which showed a 2.3 percent gain in sales from 444,000 to 454,000 as well as gains in both the median and average price of a new home.

While the improvement in builder confidence is a positive sign for the housing sector, the HMI doesn't always match up with home sales. The overall index dropped in both March and April when new home sales rose; buyer traffic also rose in March.

The increase in confidence could show up in the Census/HUD report on residential permits and starts. The report for May will be released Tuesday, while the report for June will be released next month. Those reports in recent months have shown a shift to multifamily activity.

In the year ended April, single-family starts averaged 68 percent of starts, down from 69 percent in the previous 12 months. Permits for single-family homes averaged 63 percent of all permits in the 12 months ended in April, down from 65 percent in the preceding 12 months.

Builder confidence improved with low inventories of new homes for sale. The inventory of new homes for sale in April--the most recent data reported by Census and HUD--was 155,000, the highest level since November 2011. The months' supply of homes for sale in April, calculated using the inventory and the monthly sales pace, was 3.5, matching March at the lowest level since August 2003.

The confidence reading came as construction jobs are increasing, up 189,000 in the last 12 months, about 3.4 percent with about 19,000 new residential construction jobs. Residential construction is about 10 percent of all construction employment. The number of unemployed construction workers, according to the Bureau of Labor Statistics, fell to 1,077,000 in April from 1,195,000 in March as construction job openings increased. In April there were 7.7 unemployed construction workers for every available job down from 11.0 in March.

The index, built based on surveys conducted jointly by the NAHB and Wells Fargo, gauges builder perceptions of current single-family home sales and sales expectations for the next six months as ""good,"" ""fair"" or ""poor."" The survey also asks builders to rate traffic of prospective buyers as ""high to very high,"" ""average"" or ""low to very low."" Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

_Hear Mark Lieberman every Friday on P.O.T.U.S. Radio, Sirius-XM 124, at 6:20 a.m. Eastern._