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Homebuilders hopes rise to 7-year high

For the first time in seven years, homebuilders nationwide have more positive things to say about their business than negative, according to new survey results released Monday.

The National Association of Home Builders/Wells Fargo builder sentiment index leaped to 52 this month from 44 in May.

A reading above 50 indicates more builders view sales conditions as good rather than poor. The index hasn’t been that high since April 2006, just before the housing market collapsed.

Measures of customer traffic, current sales conditions and builders’ outlook for single-family home sales over the next six months also soared to their highest levels in seven years.

Low mortgage interest rates and pent-up demand are driving buyers to the housing market after years of holding back. A shrinking inventory of existing homes is drawing more buyers to newly-built homes.

The results serve as “an indicator that even though we are in this soft spot in the overall economy, that’s not necessarily true in housing,” said David Crowe, chief economist for National Association of Homebuilders.

Following steep declines through 2009, home prices generally across the country have been rising at a stronger clip since the beginning of 2012, said Kermit Baker, chief economist for The American Institute of Architects.

The foreclosure crisis led to a glut of lower-priced homes for sale, making it hard for new home construction to compete.

“The steep housing price declines and resulting foreclosure crisis are winding down,” Baker said. “This stabilization has been instrumental in the homebuilding rebound.”

Ohio’s residential construction market has experienced “some small steps forward,” said Vincent Squillace, executive vice president of Ohio Home Builders Association. “A lot of people are deciding they’re going to have to take a lower price on their house, so they’re selling and moving up.”

“Financing is marginally better, but we haven’t seen a lot of activity in new lot development,” Squillace said.

Roughly 174,000 Ohio residents work in construction.

Ohio single family and multi-family housing starts sank to 12,000-13,000 starts a year during the worst of the recent crisis, down from an average 44,000-48,000 starts a year in the early 2000s, Squillace said. Estimates are that housing starts in the Buckeye State could grow to 16,000 in 2013, and maybe 20,000 in 2014, still far below past levels, he said.

“It all relates to demographics. We’re losing population as a state … and we’re losing our young people,” he said.

The same sense of improvement is missing in the nonresidential sector, which includes commercial and industrial construction, said Anirban Basu, chief economist for Associated Builders and Contractors Inc.

Nationally, “there is not that much momentum in nonresidential construction spending at all,” Basu said.

Nonresidential construction spending is growing in many private sector segments including lodging. However, the private sector represents the smallest share of construction spending. Meanwhile, heavily constrained public sector budgets are crimping highway, street and education related construction activity, Basu said.

“The economy is growing, interest rates are low, the economic fundamentals are improving, all that suggests we should have a fairly robust nonresidential construction recovery taking place,” he said. “It’s not.”

Residential construction typically improves before nonresidential after a recession, Crowe said.

“This has been such a weak economy that neither has shown a strong spark and only recently have we started to see residential improve,” Crowe said. “The employment component is what you need to get the nonresidential going.”

The economists cited figures showing U.S. nonfarm employment added 2,115,000 jobs from May 2012 to May 2013. But between December 2007, the start of the Great Recession, and May 2013, the nation is still 2.4 million jobs short, Basu said.

Crowe, Baker and Basu spoke on a conference call Monday organized by their respective trade groups to give a mid-year 2013 construction forecast.

The Associated Press contributed to this report.

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