Housing is the ‘hottest part’ of the US economy as homebuilder confidence hits 20-year high

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Workers are seen as new construction takes place at the Umbria a Lennar Corp. project on September 19, 2011 in Miami, Florida. Joe Raedle/Getty Images

US homebuilders are the most confident they have been in two decades as an improving economic backdrop propped up the key sector through the end of 2019.

The National Association of Home Builders/Wells Fargo Housing Market Index soared five points to hit 76 in December, according to data released Monday. The reading is the highest since June 1999.

Economists surveyed by Bloomberg expected the index to hit 70 in December. Any reading over 50 represents homebuilder optimism, and readings under 50 symbolise a more negative outlook.

Consumer traffic and robust sales both notched their best scores since the late 1990s and drove the housing index higher. The measurement of prospective buyer interest jumped four points to 58. NAHB’s metric for current sales conditions rose seven points to 84.

The latest reading arrives as a trio of Federal Reserve rate cuts pushed mortgage costs lower through the end of the year. The latest jobs data also pointed to the US labour market remaining strong amid trade tensions and a lagging manufacturing sector.

“Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labour market,” NAHB Chair Greg Ugalde said in a statement.

The year-end surge further establishes the housing sector as “the hottest part of the whole economy,” Pantheon Macroeconomics chief economist Ian Shepherdson said Monday. Homes are many Americans’ biggest investments, and the December data signals healthy demand to continue into the new year.

“The consensus was inexplicably soft, given the rising trend in mortgage demand, but this is way better than we dared to hope,” Shepherdson said, adding that he expects “further increases in sales and construction activity over the next few months, at least.”

The NAHB index reading for January is scheduled for release on January 16, 2020.


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