Builders are the most confident in 20 months that Americans are looking to buy houses

REUTERS/Mike Blake

Homebuilder sentiment rose three points in October, hitting its highest level since February 2018 on lower mortgage rates and a stable unemployment rate.

The National Association of Home Builders/Wells Fargo Housing Market Index reached 71 for the month, surpassing nearly all estimates from economists polled by Bloomberg. Any reading above 50 indicates a positive sentiment from surveyed homebuilders.

“The housing rebound that began in the spring continues, supported by low mortgage rates, solid job growth and a reduction in new home inventory,” NAHB Chairman Greg Ugalde said in a statement.

Builder optimism in the West saw the biggest increase, jumping to 83 from 76 in September. The South – the largest region recorded by the index – jumped by three points to 76.

Sentiment fell slightly in the Midwest and Northeast regions, by one and four points, respectively.

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The Federal Reserve’s dual interest rate cuts through the summer pushed borrowing costs lower, propping up the residential real estate market after growth slowed through 2018. Thirty-year mortgage rates flirt with three-year lows, adding new incentive to the real estate market.

Housing reports are viewed by economists as key forward-looking economic indicators, as homes tend to be consumers’ largest investments. Wednesday’s data projects the rise in sentiment to continue through the year, with falling mortgage rates boosting the key sector, JPMorgan Chase analyst Daniel Silver said.

“Real residential investment declined in 1Q and 2Q this year, but we are confident that it will increase in 3Q based on related source data in hand as well as a generally upbeat tone across many housing indicators,” he wrote.


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