Buyers haven’t flocked to new homes this much since the bubble

It’s fairly common to hear that a particular economic data point is the best since the recession. But you’d have to go back a bit further to compare the last time home builder sentiment was so high.

In December, builder sentiment, as measured by the National Association of Home Builders’ housing market index, surged to the highest reading since July 2005 — the height of the housing bubble.

December also marked a fresh high for a key component of the sentiment index, the sub-gauge that tracks perceptions of buyer traffic. The traffic gauge didn’t just reach its highest since the housing bubble last month – it also marked the first time the gauge crossed the neutral 50 line.

                          © Provided by Dow Jones & Company, Inc.

As NAHB explains in its release, “The survey also asks builders to rate traffic of prospective buyers as ‘high to very high,’ ‘average’ or ‘low to very low.’ Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.”

In other words, in recent memory, builders have only taken a glass-half-full view of their traffic during a time of excessive speculation and frenzied buying.

There’s nothing wrong with that, of course. Builders certainly aren’t behaving in a speculative manner right now. There were 20% fewer new homes available for sale last month than the average over the past five decades, according to Commerce Department data, despite a much bigger population.

If anything, most economists believe they’re being too restrained and conservative. There’s enough demand in the marketplace right now to support much stronger levels of housing construction, analysts say.

Maybe now builders will agree.

 

Andrea Riquier

 

 

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