U.S. home builder sentiment rose in February to the highest level in nearly five years, a clear sign of improvement for an industry trying to climb out of a deep slump.
The National Association of Home Builders says its housing market index grew to 29 from 25 in January. The increase was the fifth in a row and carried the index to its highest since May 2007. The results were better than expected. Economists polled by Dow Jones Newswires had forecast a reading of 26.
Historically, the reading still is low. A reading above 50 in the NAHB index would mean more builders view conditions as good rather than poor. The gauge has not been in positive territory since April 2006.
This is the longest period of sustained improvement we have seen…since 2007.
Foreclosures are still competing with new-home sales. Many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.
All three components of the builders' index increased. Builders' assessment of traffic from potential buyers, current sales conditions, and builders' expectations for sales over the next six months all reached the highest point since mid-2007.
The February index was based on a survey of 389 builders.
A new report from the National Association of Home Builders has found that first-time homebuyers are choosing to buy smaller and less expensive properties than existing buyers.
The study by the NAHB found that first-time buyers purchased homes costing an average of $184,000 with approximately 1,874 square feet of space. By comparison, the homes purchased by veterans of the real estate market averaged $297,000 and more than 2,500 square feet.
Bob Jones, chairman of the NAHB, says "Builders are increasingly gearing their homes to the needs of first-time buyers, and we expect the trend to continue in the period ahead as the economy begins generating more jobs and more people in their 20s form households."
First-time buyers, which accounted for 41 percent of home purchases from 2007 to 2009, had an average age of 34 years of age, while those trading up had an average age of 46.
However, the overall sales of new homes have continued to struggle in recent months. Statistics from the Commerce Department found there were 288,000 new homes sold in each of the last two months – the second-lowest mark since the government began keeping track.
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