Builder confidence improves in May

Builder confidence in the market for newly built, single-family homes improved three points to 44 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for May. This gain, from a downwardly revised 41 in April, reflected improvement in all three index components -- current sales conditions, sales expectations and traffic of prospective buyers. 

“Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies,” said NAHB chairman Rick Judson, a home builder from Charlotte, N.C. “This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor.”

All three HMI components posted gains. The index gauging current sales conditions increased four points to 48, the index gauging expectations for future sales increased a single point to 53, and the index gauging traffic of prospective buyers gained three points to 33. 

Looking at the three-month moving averages for regional HMI scores, no movement was recorded in the Northeast, Midwest or South, which held unchanged at 37, 45 and 42, respectively. Only the West recorded a decline, of six points to 49 in May. 

The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.