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Homebuilders’ confidence index rise to 5-year high

But reading below 50 indicates still-negative perception

Confidence among U.S. builders rose to the highest level in five years in May, a hopeful sign that modest improvement in the housing market will pick up.

The National Association of Home Builders/Wells Fargo builder sentiment index rose to 29 in May. That’s the highest reading since May 2007 and up from a downwardly revised reading of 24 in April.

The index rose for six straight months before falling in April.

Still, 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 reported improving sales and higher traffic from prospective buyers. A gauge measuring confidence in sales over the next six months also rose, to 34 from 31.

The improved outlook follows other recent signs that the depressed housing market is slowly improving.

In March, U.S. builders requested the highest number of permits to build new homes and apartments in 3 1/2 years. And the number of people who signed contracts to buy homes rose in March to the highest level in nearly two years.

Mortgage rates have fallen to record lows, and hiring has picked up, making it easier for more Americans to buy homes. Still, many would-be buyers are having difficulty qualifying for home loans or can’t afford larger down payments required by banks.

The Commerce Department said Wednesday that builders broke ground at a seasonally adjusted annual pace of 717,000 homes in April from March. That’s 2.6 percent more than March’s total, which was revised higher. Construction rose for single-family homes and apartments.

Building permits, a gauge of future construction, fell last month from a 3 1/2-year high to a seasonally adjusted annual rate of 715,000. But that was because of a 23 percent drop in the volatile apartment category. Permits for single-family homes rose almost 2 percent.

Even with the gains, the rate of construction and the level of permits requested remain roughly half the pace considered healthy. But the increase, along with rising builder confidence and stronger job growth, is a hopeful sign that the home market may finally be starting to recover nearly five years after the housing bubble burst.

Builders have grown more confident since last fall, in part because more people have expressed interest in buying a home.

 

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