Builders Sing the Same Tune for 4th Straight Month

Home builders' sentiment toward the single-family housing market has held firm over the last few months, showing slow, but continued progression in the single-family sector. However, builders are still concerned about growing regulation and labor and lot shortages.

Home builder confidence in the market for newly-built single-family homes was flat for the month of May at 58, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

“Builder confidence has held steady at 58 for four straight months, which indicates that the single-family housing sector remains in positive territory,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Illinois.  “However, builders are facing an increasing number of regulations and lot supply constraints.”

Source: NAHB

In January,  builder confidence came it at 61, and this was the last time that builder confidence was not at 58.  It is now seven points lower than its recent peak of 65 in October, but the index is still well above the tipping point of 50.

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.” Any number over 50 indicates that more builders view conditions as good than poor.

According to the report, the HMI components measuring sales expectations in the next six months increased three points to 65, while the component charting current sales conditions and the index gauging buyer traffic both held steady at 63 and 44, respectively.

Regionally, in terms of three-month moving averages for regional HMI, the South and Midwest both rose one point to 59 and 58, respectively. Meanwhile, the NAHB reported that the West remained unchanged at 67 and the Northeast fell three points to 41.

“The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” said NAHB Chief Economist Robert Dietz. “Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward.”