Residential construction is looking up in June after the National Association of Home Builders (NAHB)/Wells Fargo confidence index rose to 29, which is the highest since May 2007. The index read 28 during May this year, according to Bloomberg. Readings below 50 mean that conditions are poor.
The NAHB’s Barry Rutenberg said that the small increase after a 4 point jump in May shows that the improvement is continued and gradual. The cause of confidence increase could be due to low mortgage rates and cheap properties, though access to credit is still somewhat limited. Additionally, foreclosures are continuing to provide cheap properties to the market.
The Mortgage Bankers Association’s refinancing index rose to a three-year high, indicating an increase in homeowners refinancing their mortgages. The increase is also likely due to lower interest rates. The average rate on a 30-year fixed rate mortgage hit a record low of 3.67% in the first week of June.
The Federal Reserve noted that there are indications of a single-family housing market recovery. Their latest Beige Book economic assessment characterized the recovery as fragile, though. Economists predicted that permits probably rose last month, which is a proxy for future construction.
Business Section: Investing Ideas
There is positive sentiment in the housing market, and interest rates are at record lows, providing opportunity for consumers to refinance or purchase new homes.
New-home building and renovations might increase, and construction companies will likely benefit from the activity.
Use Kapitall tools to analyze some homebuilder/construction stocks. Do you think they will see more action from the market?
Interactive Chart: Press Play to compare changes in market cap for HOV, DHI, SPF, MHO, KBH, and LEN:
Interactive Chart: Use the Turbo Chart to compare the stock performance of HOV and DHI against the performance of the S&P 500 Index (SPX):
(Written by Danny Guttridge)