US home builders more confident in August

Home builders grew more optimistic in August as an improving job market and falling mortgage rates boosted the outlook for home sales. 

An index of builder confidence in the market for single-family homes rose two points to 55 this month, the National Association of Home Builders said Monday. It was the gauge's second consecutive month over 50, a level that indicates more builders generally see conditions as good than bad. 

Economists surveyed by The Wall Street Journal had expected an August reading of 53. 

The rise in the NAHB's broad gauge of confidence reflected gains in all three of its components. Its measures of current sales conditions and expectations for future sales each rose two points to 58 and 65, respectively. The measure of prospective-buyer traffic increased three points to 42. 

"Each of the three components of the [index] registered consecutive gains for the past three months, which is a positive sign that builder confidence appears to be firming following an uneven spring," said NAHB chief economist David Crowe. "Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices." 

A regional breakdown of the data showed the gains were unevenly distributed with builders feeling more confident in the Northeast and Midwest but less so in the South and the West. 

Improving home-builder confidence typically leads to increased construction activity, a key driver of economic growth. After rising steadily in 2012 and much of 2013, home building started falling off in the second half of last year as declining affordability pinched demand. 

After an unusually harsh winter further depressed home sales and construction, the sector has struggled to regain traction. The Commerce Department's gauge of new home starts fell in both May and June. Heavy rain in the south of the country disrupted building activity in June. 

Sales of existing homes, which make up the bulk of US home sales, have been trending steadily higher since April, though a leading indicator of sales compiled by the National Association of Realtors ticked lower in June. 

Federal Reserve officials have cited concerns over the strength of the housing industry as a risk factor in their projections for a gradually strengthening economy. ""The housing sector... has shown little recent progress," Chairwoman Janet Yellen said in Senate testimony last month. 

Still, most economists expect a steadily improving labour market to buoy demand for new housing. July marked the first time since 1997 that employers have added 200,000 or more jobs for six consecutive months. 

Easing mortgage rates, which have been hovering around year lows in recent weeks, should also offer support. For the week ended Thursday, the 30-year fixed-rate mortgage averaged 4.12 per cent, compared with 4.14 per cent a week earlier and 4.4 per cent a year earlier.