Homebuilder sentiment, home sales, prices jumping

WASHINGTON -- Confidence among U.S. homebuilders rose this month to its highest level in six and a half years, driven by strong demand for newly built homes and growing optimism that the housing recovery will strengthen next year, according to a widely followed private survey out Monday.

The National Association of Realtors also said Monday that sales of previously occupied homes rose solidly in October, helped by improvement in the job market and cheap mortgages.

Sales rose 2.1% to a seasonally adjusted annual rate of 4.79 million. That's up from 4.69 million in September, which was revised lower. The sales pace is roughly 11% higher than a year ago. But it remains below the more than 5.5 million that economists consider consistent with a healthy market.

Superstorm Sandy delayed some sales in the Northeast, the Realtors' group said. Sales fell 1.7%, the only region to show a decline. Most of the drop was due to the storm, but those sales will likely be completed in future months, the group said.

As for homebuilder sentiment, the National Association of Home Builders/Wells Fargo builder sentiment index increased to 46, up from 41 in October. That's the highest reading since May 2006, just before the housing bubble burst. Readings below 50 suggest negative sentiment about the housing market. The index last reached that level in April 2006. Still it has been trending higher since October 2011, when it stood at 17.

A measure of current sales conditions rose this month by 8 points to 49, the highest level since May 2006. The survey is based on responses from 417 builders.

There have been other positive signals from the housing market. Applications for mortgage loans to buy homes jumped 11% the week ended Nov. 9, compared with a week earlier, the Mortgage Bankers' Association said last week. Purchase applications are up 22% in the past year.

Foreclosures are slowing. The number of properties that began the foreclosure process in the first 10 months of the year fell 8% compared with the same period last year, RealtyTrac said last week.

Home prices have been rising steadily, though they remain lower than they were six years ago. And builders broke ground on new homes and apartments at the fastest pace in more than four years in September. The jump could help boost the economy and hiring.

Still, the market has a long way back to full health. Many potential home buyers cannot meet stricter lending standards or produce larger down payments required by banks.

Federal Reserve Chairman Ben Bernanke said Thursday that banks' overly tight lending standards may be preventing sales and holding back the U.S. economy.

Meantime, Lowe's (LOW) said Monday that its third-quarter net income surged 76%, helped by lower costs and higher revenue, as the company's efforts to revamp its merchandise and prices appeared to be gaining traction.

Its adjusted earnings without charges and its revenue both beat Wall Street forecasts. Its shares were up 7% in trading Monday. Its shares peaked for the past year at $33.63 on Nov. 2 and traded as low as $22.39 last November.

Lowe's has been retooling its pricing strategy, and last summer returned to offering permanent low prices on many items across the store, instead of offering fleeting discounts. But the changes have been slow to catch on, and last quarter Lowe's said it could take until the middle of next year to reap the benefits of the strategy.

"We are keenly focused on improving our core business," said CEO Robert A. Niblock. "Our level of execution is improving and we delivered solid results in the third quarter."

The results are also the latest indication that home-improvement retailers and other housing-market related companies are benefiting from the beginning of a rebound in the housing market, with home prices and home sales growth both improving.

Last week rival Home Depot reported slightly higher third-quarter net income and the company raised its full-year forecast. Home Depot also benefited from a surge in sales late in the quarter from Superstorm Sandy preparations. Lowe's did not point to any benefit from the storm in its earnings release.

Lowe's earned $396 million, or 35 cents per share, for the three months ended Nov. 2. That compares with $225 million, or 18 cents per share, a year ago.

The current quarter includes charges that lowered earnings by 5 cents per share. In the prior-year period, charges reduced earnings by 18 cents per share.

The adjusted earnings of 40 cents per share beat the 36 cents per share that analysts polled by FactSet predicted.

Revenue rose 2% to $12.07 billion from $11.85 billion. That also beat Wall Street's estimate of $11.93 billion.

Revenue at stores open at least a year, a key gauge of a retailer's health, increased 1.8%. At its U.S. stores, the metric climbed by the same%age rate. This figure excludes results from stores recently opened or closed.

For fiscal 2012, Lowe's still expected earnings of about $1.64 per share and revenue to be approximately the same as 2011's $50.21 billion. Analysts forecast earnings of $1.66 per share on revenue of $50.1 billion.

Lowe's Cos., which is based in Mooresville, N.C., has 1,750 stores in the U.S., Canada and Mexico.

Associated Press