Jim Christy works on a new home July 10, in Pepper Pike, Ohio. Confidence among U.S. homebuilders is swelling to a five-year high.
Jim Christy works on a new home July 10, in Pepper Pike, Ohio. Confidence among U.S. homebuilders is swelling to a five-year high.
Homebuilders grew more confident in the housing recovery in August, as many reported that prospects for sales are the best they've been since the home bubble burst five years ago. Meanwhile, industrial output rose for the fourth month in a row, a hopeful sign that manufacturing is recovering after a weak spring.
The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday rose two points this month to 37, up from 35 in July. That's the highest reading since March 2007.
The index, which is based on responses from 478 builders, has been trending higher since October and only dipped once since January suggesting a turnaround in housing is solidifying after years of stagnation.
Any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached that level since April 2006, the peak of the housing boom.
Homebuilders have mostly enjoyed improved sales trends this year, aided by low mortgage rates and a decline in the inventory of unsold homes. The pace of foreclosures slowed sharply last year, and banks appear to be holding back from flooding the market with foreclosed properties.
While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening.
Many economists believe that housing construction could contribute to overall economic growth this year for the first time since 2005.
"While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening," said Barry Rutenberg, chairman of the National Association of Home Builders.
In August, builders reported seeing the best sales level since February 2007, according to a separate measure in the latest survey. Their outlook for sales in the next six months is at the highest level since March 2007. Turnout by prospective buyers, meanwhile, returned to levels not seen since May 2006.
Even so, the housing recovery could stumble should the economic growth and employment stay weak.
Factory Output Rises Again
Industrial production, which includes output at factories, mines and utilities increased 0.6 percent in July from June, the fourth straight monthly increase, the Federal Reserve reported Wednesday.
Factory output, the most important component of industrial production, rose 0.5 percent, the second straight increase. Factory output has risen 21.9 percent since its recession low hit in June 2009 and is just 1.7 percent below the pre-recession peak for factory output reached in April 2007.
Mining output, which includes oil and gas production as well as coal mining, increased 1.2 percent in July. Utility output rose 1.3 percent, largely because of hot weather in many parts of the country.
Despite the deteriorating global backdrop, U.S. manufacturing continues to expand. Manufacturing is hanging in there.
Manufacturing helped lift the economy out of the Great Recession three years ago. But it has slowed this spring as consumers cut back on spending and businesses invested less in machinery and equipment. Some worry that manufacturing could weaken further in coming months if Europe's financial crisis and slower global growth cut demand for U.S. exports.
Adding to those worries Thursday was a survey from the Federal Reserve Bank of New York that showed manufacturing conditions in the New York region shrank in August. The Empire State index fell to -5.9, down from a reading of 7.4 in July.
Still, analysts noted that the growth in U.S. factory output in July and June suggests the spring slowdown in manufacturing may be temporary. July's increase was led by a 3.3 percent surge in output of motor vehicles and parts. Production of computers and primary metals such as steel also showed big gains.
"Despite the deteriorating global backdrop, U.S. manufacturing continues to expand," said Paul Ashworth, chief U.S. economist at Capital Economics. "Manufacturing is hanging in there."
