Housing Contractors Gain Confidence in Economy

U.S. homebuilders' confidence in the housing market edged higher this month, reflecting improved demand for new homes as the traditional spring home-selling season ramps up.

But the outlook for sales of single-family homes over the next six months dimmed slightly as builders continue to grapple with a shortage of skilled workers, ready-to-build land and rising building materials costs.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday rose to 47. That's up from February's reading of 46.

Readings below 50 indicate that more builders view sales conditions as poor rather than good.

The overall index had been above 50 from June through January, reflecting a strengthening housing market. The latest reading, based on responses from 296 builders, comes as the spring home-selling season gets going. The season typically sets the pattern for residential hiring and building construction in the ensuing months.

A surprisingly strong pace of new-home sales in January boosted hopes that the spring buying season will be solid enough to lift the overall economy. Sales jumped 9.6 percent to a seasonally adjusted annual rate of 468,000. That's the fastest pace in more than five years.

The strength in purchases followed a slowdown that had been linked to higher mortgage rates and severe winter weather.

Despite the sharp increase in sales of new homes in January, many builders are having trouble finding skilled workers and land parcels cleared for new construction.

“A number of factors are raising builder concerns over meeting demand for the spring buying season,” said David Crowe, the NAHB's chief economist. “These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale.”

Those factors and the lingering impact of severe winter weather weighed on a survey of builders' expectations for sales over the next six months. The March reading fell one point to 53, the lowest level since May.

Even so, builders' view of current sales conditions for single-family homes rose one point this month to 52, while a measure of traffic by prospective buyers increased two points to 33.

Housing, while still a long way from the boom of several years ago, has been recovering over the past two years. Residential construction has grown at double-digit rates over the past two years and contributed about one-third of a percentage point to overall economic growth last year.

Many economists predict that sales of both new and existing homes will rise in 2014, lifted by an improving economy and steady job growth.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.

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