NEW YORK, Nov 19 (Reuters) - U.S. homebuilder sentiment rose for a seventh consecutive month in November and hit its highest level in over six years as demand for new homes increased due to a shrinking supply of distressed and foreclosed inventory, the National Association of Home Builders said on Monday.
The NAHB/Wells Fargo Housing Market index rose to 46 from 41 the month before, the group said in a statement. Economists polled by Reuters had predicted the index would remain unchanged at 41. The index was at its highest level since May 2006.
However, the gauge remained below 50, showing that the housing market was still some way off full recovery. Readings below 50 mean more builders view market conditions as poor than favorable. The index has not been above 50 since April 2006.
Still, the measure has made strong progress over the last year, helping to cement optimism in the sector. In November last year it stood at just 19. Housing led the financial crisis of 2008-09 and has been one of the biggest overhangs in the economic recovery.
“Builders are reporting increasing demand for new homes as inventories of foreclosed and distressed properties begin to shrink in markets across the country,” said NAHB Chairman Barry Rutenberg in a statement.
“In view of the tightening supply and other improving conditions, many potential buyers who were on the fence are now motivated to move forward with a purchase in order to take advantage of today’s favorable prices and interest rates,” he said.
The single-family home sales component rose to 49 from 41. The gauge of single-family home sales expectations for the next six months rose to 53 from 51, its third consecutive month above 50, while prospective buyer traffic was flat at 35. (Reporting by Edward Krudy; Editing by Chizu Nomiyama)