Wednesday, February 8, 2023 10:23 am

What’s the deal? Are builders hopelessly optimistic?

HopeBy Nick Timiroas | The Wall Street Journal

Homebuilder confidence has returned to its highest level since late 2005, near the peak of the housing market, the National Association of Home Builders reported Wednesday. But housing starts aren’t even half of the way back to the late 2005 level.

First, part of the disconnect may have to do with the fact that many smaller builders have either gone out of business or sold themselves to larger suitors during the downturn. Those that remain—having survived the bust—could generally be more optimistic.

Second, even though a reading of 50 implies favorable market conditions (September’s reading came in at 59), there’s no explicit definition of favorable conditions. After what builders have lived through during the last few years, favorable conditions in 2014 may be quite a bit different from favorable conditions in 2006.

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