The U.S. housing sector has faced some challenges over the past several months with a colder than normal winter taking center stage in the minds of many. It seems as though spring couldn’t come soon enough. Inventories have remained tight, home affordability is still low, and home sales haven’t ticked up as quickly as most had hoped for. But with warmer temperatures ahead and the economy slowly improving, some key indicators show housing could start to see some growth in the coming months.
Homebuilder confidence rose slightly in March, signaling a pickup in housing. The National Association of Home Builders/Wells Fargo Index of builder confidence climbed to 47 from 46 in February. The Index gauges builder perceptions as “good,” “fair” or “poor” as it relates to current single-family home sales and sales expectations for the next six months. Although this number rose less than anticipated by economists, it’s a positive sign when taking into account that February’s reading was the biggest drop on record thanks to snowstorms, fewer prospective buyers shopping, and market and labor shortages. Readings below 50 indicate survey respondents reported more poor market conditions than good. The index’s components were mixed in March. The component gauging current sales conditions increased one point to 52 and the component measuring buyer traffic increased two points to 33. The component gauging sales expectations in the next six months dropped one point to 53.
U.S. weekly job claims for unemployment benefits increased by 5,000 two weeks ago but this number was lower than expected. The four-week moving average of new job claims which help to smooth out volatility, fell by 3,500, the lowest level since last November. Reported claims dropped 14,000 from February to March, pointing to further proof of job growth improvement. If this trend continues, housing should reap the positive benefits from increased hiring. People who have a steady income are more likely to consider purchasing a home. On Wednesday, Janet Yellen, the new Federal Reserve Chair, said harsh weather played an important role in the economy’s weakness during the first quarter and added that labor market conditions continue to improve.
Manufacturing also had some positive news to report citing faster than expected growth in February. ISM’s (Institute for Supply Management) U.S. manufacturing index rose to 53.2 from 51.3 in January. Readings for this index above 50 are a sign of expansion. Russell Price, senior economist at Ameriprise Financial Inc. in Detroit and, according to Bloomberg data the best ISM index forecaster over the past two years, commented, “Manufacturing remains a bright spot for the economy. There’s still a sizable amount of pent-up demand in the consumer and corporate sectors.” This bodes well for the housing industry which has been facing pent-up demand. As manufacturing for housing supplies picks up, more homes should be constructed.
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