April Housing Numbers Show Growth, Optimism

Single-family homes and homebuilders are slowly returning from the depths of the recession, as April?EUR??,,????'???s figures and forecasts show the growth during the warm winter was no fluke.

New residential construction and builder confidence are both on the rise, evidence of a growing consensus that the housing market is on a serious upswing.

New residential construction increased again in April, as builders set a seasonally adjusted annual pace of 717,000 homes, up 2.6 percent from March's upwardly revised total of 699,000. The figure is nearly 30 percent better than the April 2011 pace of 552,000, the Commerce Department reported Wednesday.

Building permits dropped 7 percent last month to a seasonally adjusted annual rate of 715,000, down from a 42-month high of 769,000 in March, the report showed. The pace is 23.7 percent ahead of the revised April 2011 estimate of 578,000, and is a significant indicator of industry prospects for the coming months.

Single-family homes make up about 70 percent of residential home construction, and have the largest direct effect on jobs. Still, economists say about 1.5 million home builds signals a healthy housing market.

"While still less than half the pace of what we would expect in a fully healthy market, the rate of housing production in April was very solid for this point of the recovery,?EUR??,,????'?? said David Crowe, National Association of Home Builders (NAHB) chief economist. ?EUR??,,????'??Our latest builder surveys have [also] registered modest improvements in buyer traffic and near-term sales expectations for single-family homes."

Builder confidence in the prospects of new residential construction is as optimistic as it?EUR??,,????'???s been since May of 2007. The NAHB/Wells Fargo Housing Market Index (HMI) reported an increase in all survey categories and the composite index gained five points in May to reach 29, though a figure over 50 means more builders view conditions as good than poor.

The component on current sales conditions and the component measuring the traffic of prospective buyers each rose five points in May, to 30 and 23 respectively, the latter reaching its highest level since April 2007. The component gauging sales expectations in the next six months rose three points to 34.

"While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment, and low mortgage rates are drawing consumers back," said Crowe. "This emerging recovery could be stronger were it not for significant impediments [like] builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices."