According to reports, builders’ confidence is at the highest levels it has been at since the middle of 2007. As you are likely aware, 2007 was just before the housing bubble burst and property prices dropped significantly, almost overnight. Property prices have been struggling since 2008 and it seems that now, there is finally some good news from the housing front.
The month of May saw a four point increase in the National Association of Home Builders/Wells Fargo Housing Market Index, and June has brought with it one more point increase. This is the highest level that sentiment has been at since May 2007. The modest increases that the market has been experiencing have been steady and are finally taking the housing market out of the hole that was created back in 2008.
This is good news for the housing industry. While the uptick applies to single family homes, this is good news all around the housing market. The more that consumer confidence increases, the higher prices will go for homes and the more homes that will be built and sold. The healthier the housing market is, the better the rest of the U.S. economy will perform. This is especially beneficial to our economy considering the problems that the stock market and major indices have been facing with the debt and banking crises coming out of Spain and Greece.
Still, there are issues being faced by the housing and real estate industries. Overly tight lending atmospheres have made it tough for many home builders to get the financing they need to be fully productive. This is probably a big reason for the slowdown in builder confidence. Tightening domestic bank measures have made funding difficult and as a result, productivity is not quite as high as it could be. This is a mixed bag since it means that improvements have been made, yes, but also that there is a long way to go before the industry has fully recovered. Whether or not the industry will ever be at its 2007/2008 levels again remains to be seen, but there is plenty of evidence saying that this is quite possible if improvements continue to be made. With builder confidence on the increase, this is just one more piece of evidence saying that the housing industry can make a full recovery.
Things need to change for that recovery to happen in the fullest measure, however. Banks need to have a bit more faith in builders and loosen borrowing requirements. This will not happen if builders continue to face lowered prices for their homes, and prices cannot rise if the economy does not better itself. As you can see, there are many factors that go into the housing market and its prices, but the thing that remains constant here is the overarching reach of the national economy. Before a full recovery can be felt, things need to clear up in Europe and the domestic stock market needs to acknowledge this. Unfortunately for housing industry insiders, this might be many months or even years off in the distance.