Consistent with the argument that the housing market is now going to be a major positive force in the US economy, listen to Jeffrey T. Mezger, CEO top homebuilder KB Home on the company’s conference call this week.
Here’s the key part,
Before I discuss the second quarter results in detail, I would like to provide you with our view of the current macroeconomic environment. Sustained job growth and improved consumer confidence are key drivers in an economic recovery, and both have demonstrated variability in recent months. Job growth has shown signs of improvement, although it is unclear whether this growth is at a level that will sustain an economic recovery. We’re also concerned that consumer confidence has now declined for 4 consecutive months. I’m pleased to say, however, that the overall housing market appears to have largely stabilized and is moving into a period of recovery.
Real estate remains very localized, and the pace of recovery varies by city. Specific to the markets in which KB Home operates, we are seeing improvements in virtually every one of our 32 markets across the country. In fact, dynamics have improved significantly over the past 90 days as compared to late last year or early this year, with declining inventory levels and heightened consumer demand.
Prices have stabilized and in some select areas, increased as inventories of unsold homes are down significantly from year-earlier levels. Affordability, a key driver in this housing recovery, continues to be strong with attractive prices and historically low interest rates. As a result, we are observing a heightened sense of urgency among potential homebuyers. We are seeing healthy traffic levels with customers appearing more confident in making a home-buying decision. At the same time, however, mortgage availability remains challenging, freezing some homebuyers out of the market. As the recovery strengthens, we are hopeful mortgage underwriting will become less restrictive, which could unlock these potential buyers as well.