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As states reopen after coronavirus lockdowns, the homebuilding market is starting to bounce back.
A measure of homebuilder confidence has ticked back up into the positive range, according to the National Association of Homebuilders/Wells Fargo Housing Market Index.
“I gotta tell you, our economists predicted that we would have a V-shaped recovery in housing, and it sure looks like we’re well on our way right now,” said National Association of Homebuilders (NAHB) CEO Jerry Howard. “We were headed to a very very strong year before COVID, and it looks like we’re bouncing back and we’re going to be leading the economy out of this recession.”
Homebuilder sentiment in June reached 58 points out of 100, up from 37 points a month earlier — the largest monthly increase ever recorded since the Housing Market Index began in 2009. A score over 50 is considered positive. The recovery comes after the Housing Market Index plunged 42 points to 30 in April and rose only 7 points in May.
But pent-up demand from the spring homebuying season is bumping up summer sales, and mortgage rates are set to stay low through next year, incentivizing buyers into the market.
“Couple that [pent-up demand and low mortgage rates] with the fact that a lot of people have had to suffer through quarantines in very tight quarters. People are looking to, some of them, get into their first single-family house, [and] others [want] a bigger house,” added Howard.
In fact, housing demand was 25% above pre-pandemic levels in the first week of June, according to Redfin. Home purchase mortgage applications rose 8% the week of June 8 to its highest level in 11 years, and refinance applications rose 10% from the week prior, and up 106% from the same time last year, according to the Mortgage Bankers Association.
The Southeast, Texas and the Rocky Mountains are leading in homebuilding sentiment, but even areas where homebuilding has been weak recorded an improvement in June, according to the Housing Market Index. The Northeast jumped to a score of 48 from only 17 points in May, which is very close to a positive market score.
“The Northeastern states are among the most difficult to build in for any number of reasons, so we’re very very bullish right now,” said Howard.
‘The more hammers we put to work, the more homes we can expect to build’
While sentiment has skyrocketed, actual construction data missed estimates — but still show the beginning of a slow rebound, say economists. Construction began on 4.3% more homes in May after the dip in April, and building permits jumped 14.4%, according to the U.S. Census Bureau Wednesday morning.