Homebuilder Sentiment Climbs to Highest Level in Nine Years

U.S. homebuilder sentiment rose in September to its strongest in nearly nine years as a firming job market has begun to unleash pent-up demand and builders have reported a sharp pickup in buyer traffic since early summer, data from the National Association of Home Builders showed on Wednesday.

The NAHB/Wells Fargo Housing Market index rose to 59 in September from 55 in August, the group said in a statement. It was the fourth straight monthly gain following a lengthy slump in builder sentiment through most of the first half of the year, and topped the median estimate of analysts polled by Reuters for a reading of 56.

The reading was the highest since November 2005. Readings above 50 mean more builders view market conditions as favorable than poor.

"Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

The single-family home sales component rose to 63 from 58 and was also the highest reading since December 2013, which was the highest since the financial crisis.

The gauge of single-family sales expectations for the next six months rose to a 13-month high of 67 from 65, while prospective buyer traffic rose to 47 from 42, the highest since October 2005.

Even with the improvement, homebuilders continue to cite some headwinds.

"While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from millennials and first-time home buyers," NAHB Chief Economist David Crowe said. "Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor."

On the U.S. stock market, a subindex of homebuilders in the S&P 500 <.SPX>, including D.R. Horton Inc. (NYSE:DHI). Lennar Corp. (NYSE:LEN) and PulteGroup Inc. (NYSE:PHM.), has lagged the wider market this year, notching a decline of 3.9 percent versus an 8.1 percent gain for the broader index. So far in the third quarter, the builders' group is down 8.4 percent.

On a regional basis, the strongest market conditions were reported in the south, while the northeast continues as the only one of the four regions where a majority of builders see the market as unfavorable.