U.S. homebuilders are feeling more optimistic about their sales prospects than they have been since the high-flying days of the housing boom.
The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday jumped to 71 this month. That’s up six points from 65 in February and the highest reading since June 2005.
Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September.
The March number exceeded analyst predictions. They expected the index to hold steady at 65, according to FactSet.
Builders’ view of sales now and over the next six months also surged, as did a gauge of traffic by prospective buyers.
The increased confidence reflects heightened expectations as the spring home-selling season, which typically sets the pattern for residential hiring and building construction in the ensuing months, gets underway.
Low mortgage rates and a solid job market have helped drive home sales steadily higher. Sales of new U.S. homes rebounded in January after a steep fall-off the previous month, reaching a seasonally-adjusted annual rate of 555,000. That’s 5.5 percent higher than a year earlier. February new home sales data are due out next week.
Sales of existing homes surged in January to the fastest pace in a decade.
The pickup in home sales has occurred despite, or perhaps because of, a jump in mortgage rates since the fall. Many buyers could be accelerating purchases to get ahead of any further rate increases.
Financial markets expect faster growth and higher inflation will flow from President Donald Trump’s tax cuts and deregulation initiatives. That has pushed up interest rates on both the 10-year Treasury note and mortgages.
The average 30-year fixed mortgage rate was 4.21 percent last week, up from 4.10 percent the previous week. That’s up sharply from an average of 3.65 percent all last year.
Even with the surge in optimism this month, homebuilders continue to grapple with a shortage of skilled workers and land parcels cleared for home construction.
“While builders are clearly confident, we expect some moderation in the index moving forward,” said Robert Dietz, the NAHB’s chief economist.
This month’s builder index was based on 313 respondents.
A measure of current sales conditions for single-family homes jumped seven points to 78, while a gauge of traffic by prospective buyers gained eight points to 54. Builders’ view of sales over the next six months climbed five points to 78.