If you build it, will they come? Homebuilders are beginning to think so. A key home building metric released today showed a large jump in builder confidence for the second straight month. A separate metric also showed that homes are becoming more affordable.
The National Association of Home Builders, a housing policy trade association, released their most recent Housing Market Index, a survey of 733 residential developers that gauges their expectations for home sales in the next six months. This month, the HMI rose to 16 from 14 in April. April also saw the first double-digit score for the metric in six months and the largest one-month gain since May 2003.
The Housing Opportunity Index, also released today, demonstrated that 72.5% of homes sold in recent months were affordable for families earning $64,000, the national median income. That was up from 62.4% in the previous quarter.
The two-month boost in the HMI should be tempered. A score over 50 is considered good, but the index has not reached those heights since April 2006. Still, NAHB officials took heart.
"The fact that the May HMI continued to tick up from April's five-point increase provides confirming evidence that the improved confidence level was no fluke," NAHB Chief Economist David Crowe said in a release about the HMI results. "This continued increase indicates that homebuilders feel we're at or near the bottom of the market and that positive signs lie ahead for builders and potential home buyers, provided that builder access to production credit significantly improves."
The encouraging housing numbers helped spur a rally in the markets today, as the Dow Jones industrial average bolted 235 points, finishing at 8,504.08. The Dow Jones U.S. home construction index leaped 7.4 percent to 238.63.
Home builders, improvement and furnishing stocks were all in positive territory by day's end, headlined by
8% rise following better-than-expected first-quarter earnings today, and
The Home Depot's
nearly 7% jump ahead of its earnings release tomorrow. Both
and Toll Brothers
rose about 14% and 6% respectively on the day.
The U.S. Commerce Department will release its monthly housing starts report tomorrow morning.