Homebuilders Are Feeling Better, Which Is Great News

If there's one thing that could get the economy back up and humming, it's home construction. That's why today's news about rising confidence among homebuilders should be greeted enthusiastically.

The National Association of Home Builders reported this morning that its housing market index, which tracks confidence among homebuilders, rose by six points to 57 in July. It was the index's third consecutive monthly gain and the strongest since the beginning of 2006.

The association's chairman Rick Judson noted that, "Today's report is particularly encouraging in that it shows improvement in builder confidence across every region as well as solid gains in current sales conditions, traffic of prospective buyers and sales expectations for the next six months."

The rising confidence is consistent with at least two related trends. At the end of last week, both JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) announced that their purchase-money mortgage originations shot up by 44% and 46%, respectively, over the first quarter.

In addition, homebuilders themselves are starting to report dramatically improved quarterly results. Most recently, Toll Brothers (NYSE: TOL  ) said that its unit deliveries in the second quarter were up by 33% while Lennar's (NYSE: LEN  ) were higher by 39%.

The significance of this industry for the overall economy cannot be overstated. It's estimated that two to three jobs are created with every home built. As a result, it's axiomatic that there's never been a strong economy without a strong housing market.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!


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