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Homebuilder Sentiment

October 19, 2011 by staff 

Homebuilder SentimentHomebuilder Sentiment, U.S. Homebuilders increased more than two years after a developer confidence index unexpectedly rose to its highest level since May 2010, boosting optimism that demand for new homes may be improving.

Index Standard & Poor Supercomposite Homebuilding rose 9.6 percent at the close of the New York Stock Exchange, the biggest increase since March 2009. Meritage Homes Corp. and Toll Brothers Inc., the largest U.S. luxury-the builder, rose the most among the 12 members of the meter, each winning by 13 percent.

The National Association of Home Builders / Wells Fargo confidence index in October rose to 18 from 14 the previous month, data from the Washington-based group showed today. Economists surveyed by Bloomberg News expected that the measure would rise to 15, the median forecast of 47 economists. Readings below 50 mean most respondents said that conditions were bad.

Actions builder “started picking up the number of feeling better, amid fears there,” said Megan McGrath, ananlyst at MKM Partners LP in Stamford, Connecticut, in an e-mail. “Also, potential investors are setting up for season results and other data for construction company to come later this week, now people think they can not be as bad as feared.”

Competing with foreclosures

Builders are struggling as the unemployment rate stood at 9.1 percent, discouraging buyers to make purchases, and new homes to compete with foreclosed properties which are generally sold at a discount. A total of 610,337 households received default notices, auction or repossession in the third quarter, compared with 608,235 in the last three months, according to RealtyTrac Inc.

The index of homebuilder sentiment has “demonstrated several head fakes” for the increase without gaining momentum, said Adam Rudiger, ananlyst at Wells Fargo & Co. in San Francisco.

“A month of improvement is not enough to convince us that demand has improved significantly,” he wrote in a note to investors today. “But we believe that improved this month is remarkable and increases the importance of the November issue.”

The Commerce Department reported housing starts in September morning. Is expected to grow at an annual rate of 590,000 from 571,000 in August, according to the median estimate of 74 economists surveyed by Bloomberg.

“Weigh”

“We saw a demand for home purchases slowly return to the market, driven by lower home prices and all time low interest rates,” said Miami-based builder Lennar Corp., in a presentation to the October 11 regulators. “However, demand has been limited by the tightening of credit standards and hardening, high unemployment and low consumer confidence in general, continue to weigh on the purchase of new homes.”

U.S. new homes sold at an annual rate of 295,000 in August, the slowest since February, the Commerce Department reported on Sept. 26.

Home starts rose last month over the previous year in markets such as Atlanta, Las Vegas, Los Angeles and southern Florida, said Brad Hunter, chief economist at Metrostudy, which follows the construction of about 80 metropolitan areas. Single-family housing starts are likely to increase by 5 percent to 442,000 years following, according to the Houston-based company.

“In most markets, we are seeing an increase,” Hunter said in a telephone interview from his office in Palm Beach Gardens, Florida. “Unless a second recession, I think we are beyond the bottom.”

The S & P as construction is down 20 percent this year, compared with a fall of 3 percent for the S & P 500.

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