Good news for the homebuilding industry came earlier this week when the National Association of Homebuilders/Wells Fargo released the housing market index. Its numbers showed that homebuilders’ confidence rose to 49 points, which is just one point shy of an index that indicates favorable home-selling conditions and the highest reading since last December. The 49 point number is a pleasant surprise considering that economists polled by MarketWatch expected the June index to only reach 47.
Generally, an index above 50 suggests that homebuilders view home sales conditions as more favorable than not. Despite the positive jump, the index is still far short of last year’s peak of 58. In fact, the index has been below 50 points since February 2014, while for the eight months prior to February, it had been above 50 points.
There are several possible reasons that may explain why the index has not increased to its pre-February numbers:
Notwithstanding lingering effects, the circumstances that have been contributing to a lack in homebuilder confidence are slowly beginning to improve. Job creation has increased nationwide for several consecutive months, which should in turn promote confidence in job security and increase homebuyer purchasing power. Lending conditions are also slowly improving. Generally speaking, homebuilder confidence is on an upward trend indicating positive signs for the 2014 housing forecast.