U.S. homebuilder sentiment posted the highest back-to-back readings since 1999, as developers saw a surge in prospective buyers and a bump in the sales outlook.
The National Association of Home Builders/Wells Fargo Housing Market Index for December and January together were the highest levels in two decades, despite weakening one point to 75 this month, according to a report Thursday. The monthly number also slightly exceeded estimates in a Bloomberg survey.
The index component measuring present sales of single-family homes cooled while remaining near the highest since 1999, while buyer traffic matched the best level since 1998. A gauge of expected sales in the next six months matched the most elevated level since early 2018.
Mortgage rates have declined in recent weeks and fell throughout 2019 as the Federal Reserve cut borrowing costs three times. Rates are set to remain relatively low in 2020, with the Fed signaling it’s on hold until at least the end of the year.
The reading joins other indications of a rebounding housing market that is expected to buoy economic growth. Home construction spending rose for a fifth straight month in November, fueled by consumers benefiting from a solid labor market. And existing-home sales likely increased in December, according to forecasts for data due next week.
The Fed’s Beige Book of business anecdotes released Wednesday showed that the residential rental market and construction strengthened broadly in the last six weeks of 2019, with some U.S. regions highlighting low inventories restraining sales.
“With the Federal Reserve on pause and attractive mortgage rates, the steady rise in single-family construction that began last spring will continue into 2020,” NAHB Chief Economist Robert Dietz said in a statement. The Washington-based trade group representing about 140,000 members cited once again the shortage of available lots and labor, along with buyers frustrated with a lack of supply.
January sentiment was highest in the West, reaching the best since 2016, while the reading for the South matched December as the most optimistic since 2005. Sentiment in the Northeast rose slightly, but dropped seven points in the Midwest, the steepest decline in two years.
Readings above 50 indicate that more builders view conditions as good than poor.
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Bloomberg’s Jordan Yadoo contributed to this report.