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Builder Confidence Reaches Five-Year High in May

Builder confidence jumped five points in in May to 29, its highest level since the same month in 2007, the ""National Association of Home Builders"":http://www.nahb.org/ said Tuesday.


Economists had expected the index to edge up to 26 in May. The month-over-month increase was the largest since April 2009.

The total index in May was up 13 points from May 2011, the strongest year-over-year gain since April 2004.

All three components of the index ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô current sales, sales six months out and buyer traffic ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô showed strong increases in May, with buyer traffic and current sales conditions each rose five points, while the projection of sales six months ahead rose three points.

The current sales component doubled in the last year ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô also the strongest year-over-year improvement since April 2004. The six├â┬ó├óÔÇÜ┬¼├óÔé¼┼ômonth sales forecast component was also up 15 points over one year ago, the strongest year-over-year increase since July 1998. The buyer traffic component showed a nine-point year-over-year improvement.

The HMI has fallen only four times in the last 21 months, Buyer traffic has dropped only five times in that period.

The month-over-month improvement in the HMI was driven by the buyer traffic index which also


hit the highest level since May 2007.

The Index, considered a gauge of builder confidence, could show up in permits and starts data reported for May. That report from the census bureau, will be issued in June. Census will report Wednesday on permits and starts for April when builder confidence, as reported by NAHB, fell four points to 24.

""While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back,"" NAHB Chief Economist David Crowe said in a statement. ""The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices.""

The index, built based on surveys conducted jointly by the NAHB and Wells Fargo, 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 from 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. Even with the improvement in May, the index has been below 50 for 73 straight months ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô more than six years.

Regionally, the index improved in three of the four census regions: Up six points to 32 in the Northeast, up five points to 27 in the Midwest and five points to 28 in the South. The index slipped two points to 29 in the West.

The HMI survey followed a disappointing payroll report for April which showed the nation added 115,000 jobs, far below the 165,000 the market had been expecting. The same report showed no change in the average workweek and a one-cent gain in average hourly earnings putting a strain on the ability to consumers ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and potential homebuyers.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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