Homebuilder optimism vaults to five-year high

Confidence among U.S. homebuilders is swelling to a five-year high, with many now anticipating that sales of new homes will strengthen this year even as signs point to a slowing economy.

The National Association of Home Builders/Wells Fargo builder sentiment index surged six points this month to 35, the highest reading since March 2007, the trade association said Tuesday.

The index, which is based on responses from 318 builders, rose from a reading of 29 last month, marking the largest one-month gain in nearly a decade. It has declined only once between January and July.

Any reading below 50 indicates negative sentiment about the housing market. And the index hasn’t reached that level since April 2006, the peak of the housing boom.

Even so, the latest builder survey reflects growing optimism among builders that new home sales are on an upswing again after hitting the lowest point in a half century last year.

In July, builders say they observed the best sales levels since February 2007. Their outlook for sales in the next six months also brightened to the highest level since March 2007. Turnout by prospective buyers also returned to a level not seen in five years.

Cheaper mortgages and lower home prices in many markets have made home buying more attractive. Many economists believe that housing construction could contribute to overall economic growth this year for the first time since 2005.