This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Homebuilder Sentiment Is High, Yet Housing Starts Still Lag

NEW YORK ( TheStreet) -- Homebuilder confidence rose to a nearly eight-year high in August, the National Association of Home Builders said on Thursday.

The NAHB/Wells Fargo Housing Market Index rose for the fourth consecutive month to 59, as builders grew encouraged by firming home prices and rising demand amid a tight supply for homes.

But there is a disconnect between the sentiment as portrayed by the index and actual homebuilder activity. Housing starts are rising but they still remain well below normal.

According to a post on the NAHB website, the home builder sentiment index has more than doubled in the 14-month period from April 2012 to June 2013. In that same period, single-family housing starts have risen by only 17%.

The builder confidence index is designed to track and current future single-family starts and has historically been a good predictor of activity. However, there have been discrepancies between the index and starts during some periods, particularly periods of recovery.

In the previous housing recession of 1991-92, the sentiment index rose 130%, while starts rose only 71%. It took two and a half years for housing starts to double.

"Housing recoveries are dynamic periods when futures remain uncertain and reassembling the housing industry's infrastructure can be erratic," according to the post.

As "the industry recuperates and repairs itself," housing starts should start to improve. Right now, builders are facing multiple headwinds, with workers and developed lots being in short supply, building material costs soaring and credit still tight.

As a result, home builders are being careful, building just enough to make sure inventories stay lean and margins remain high.

-- Written by Shanthi Bharatwaj New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
LEN $44.90 -2.00%
TOL $27.00 -2.10%
XHB $33.41 -1.70%
IYR $77.14 -0.57%
FB $117.93 -0.54%


Chart of I:DJI
DOW 17,702.11 -189.05 -1.06%
S&P 500 2,060.02 -21.41 -1.03%
NASDAQ 4,762.9150 -54.6790 -1.14%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs