Confidence among U.S. homebuilders declines to four-month low

WASHINGTON – Confidence among U.S. homebuilders decreased in February to the lowest level in four months as winter weather prevented some prospective buyers from touring new developments.

The National Association of Home Builders/Wells Fargo sentiment gauge fell to 55 this month from 57 in January, according to figures issued from the Washington-based group Tuesday. The median forecast in a Bloomberg survey called for 58. The decline was led by a slump in customer traffic.

Frigid temperatures and snow that have blanketed swaths of the Midwest and Northeast have restrained the number of people visiting model homes. Wage growth and a strengthening job market will probably spur demand for residential real estate as mortgage rates persist near historically low levels.

“Overall, builder sentiment remains fairly solid, with this slight downturn largely attributable to the unusually high snow levels across much of the nation,” NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Miss., said in a statement.

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A reading greater than 50 indicates a majority of respondents said market conditions are good. Estimates in a Bloomberg survey of 51 economists ranged from 56 to 60. The index reached a nine-year high of 59 in September.

The group’s gauge of current single-family home sales decreased to 61 this month from 62. The reading on prospective buyer traffic dropped to 39, the lowest since July, from 44, while the six-month sales outlook index was unchanged at 60.

‘Modest’ recovery

The confidence readings remain “consistent with a modest, ongoing recovery,” David Crowe, NAHB chief economist, said in a statement. “Solid job growth, affordable home prices and historically low mortgage rates should help unleash growing pent-up demand and keep the housing market moving forward in the year ahead.”

The decrease in confidence this month was centered among builders in the Midwest, where the index dropped to 49, the lowest since June, from 59 in January. Gauges were little changed in the South and West and climbed in the Northeast.

Borrowing costs have been hovering near record lows. The average rate on a 30-year fixed mortgage was 3.69 percent in the week ended Feb. 12, according to data from Freddie Mac in McLean, Va. It reached 3.31 percent in November 2012, the lowest in data going back to 1971.

Employment and wage gains will probably help boost home sales. The labor market leapt forward in January, capping the biggest three-month gain in 17 years. Payrolls advanced by 257,000 in January, according to Labor Department figures, and about 3 million more Americans found work in 2014, the most in 15 years.

Wages climb

Average hourly earnings jumped 0.5 percent from December, the biggest one-month gain since 2008. They were up 2.2 percent over the past year, the largest advance since August.

While consumer confidence weakened this month, Americans are feeling more upbeat about their own circumstances. The University of Michigan preliminary consumer sentiment index decreased to 93.6 in February from a final January reading of 98.1 that was the highest since the start of 2004. The biggest share of respondents since 2007 said they expected their finances to improve in the coming year, which could underpin housing demand.

Household spending jumped an annualized 4.3 percent in the fourth quarter, the most since the first three months of 2006, according to data from the Commerce Department.

Whirlpool Corp, the Benton Harbor, Mich.-based appliance maker, is one housing-related company encouraged by the U.S. economic picture, even as the nation’s stronger dollar is hurting business overseas.

Appliance demand

“We continue to see improvements in housing trends, consumer sentiment and discretionary spending, which we expect would translate into increased appliance demand in the U.S.,” Co-Vice Chairman Marc Bitzer said on a Feb. 4 earnings call. “Current trends of low real wage growth and unfavorable currency are the two factors that we believe have a potential to negatively impact our business.”

Today’s homebuilder sentiment report is the first in a series of housing data this week. On Wednesday, a report from the Commerce Department is projected to show builders broke ground on 1.07 million homes at an annualized rate in January after a 1.09 million pace a month earlier, according to the median forecast in a Bloomberg survey.

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