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April 16, 2019, 3:27 p.m. EDT

Home-builder sentiment hits a 6-month high in April as the housing recovery takes hold

The average for 2019 so far: 61. The 2018 average: 67.

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By Andrea Riquier


Bloomberg News/Landov
Builders work on the framing of a new Wilson Parker Home in Phoenix, Arizona.

The numbers: The National Association of Home Builders’ monthly confidence index rose one point to 63 in April, the trade group said Tuesday .

The one-point increase in April matched the Econoday consensus of economist forecasts. Any reading over 50 signals improving conditions.

What happened: The gauge of current sales conditions rose one point to 69, but the one that tracks expectations for the coming six months fell one point to 71. The sub-index that measures traffic of prospective buyers jumped three points to 47.

The traffic component of this particular index has long been an outlier, only rarely rising above the neutral 50 line.

See: Forget everything you’ve heard about first-time homebuyers. They’re doing all right.

Big picture: April’s increase was enough to make the reading a six-month high, but that says more about the past six months than it does about the path forward for housing. The sentiment index tumbled eight points in November, charting a bigger monthly decline than what was seen in the worst of the housing crisis a decade ago, as market headwinds finally caught up to builders. Since then, the index has clawed its way back, but the 2019 average of 61 still badly lags the 67 average throughout 2018.

Still, many analysts remain optimistic about the housing market. Mortgage rates remain low, uncertainty around the 2017 tax law changes is receding, and macro conditions support homeownership for many more Americans.

Builders have under-built their inventory in this business cycle, in stark contrast to the bubble years, so consumer demand remains robust. When the Commerce Department reports on March new construction Friday, economists surveyed by MarketWatch expect the pace of building to have picked up more than 5% for the month.

Read: The lawyers who took on Big Tobacco are aiming at Realtors and their 6% fee

What they’re saying: “As we have been emphasizing over the past couple of months, the housing sector should transition to a modest tailwind for growth in 2019 as housing demand gets a boost from the sharp decline in mortgage rates since their November highs and the passage of the ‘shock’ value of tax reform,” said Deutsche Bank economists in a note out before the NAHB release.

Market reaction: Homebuilder stocks /zigman2/quotes/202739297/composite XHB -2.79%   were little changed after the NAHB release. An ETF /zigman2/quotes/203278229/composite HOMZ -2.68%   that tracks the broader housing sector has risen nearly 4% since launching in March.

Read: This chart shows the haves and have-nots of the housing market, and it’s getting worse

/zigman2/quotes/202739297/composite
US : U.S.: NYSE Arca
$ 26.48
-0.76 -2.79%
Volume: 4.57M
April 3, 2020 8:00p
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/zigman2/quotes/203278229/composite
US : U.S.: NYSE Arca
$ 17.08
-0.47 -2.68%
Volume: 1,680
April 3, 2020 8:00p
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Andrea Riquier reports on housing and banking from MarketWatch's New York newsroom. Follow her on Twitter @ARiquier.

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