Builder confidence for consumers looking to purchase newly built, single-family homes dropped two points to a level of 54 in May, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. Although confidence fell two points this month, this is an increase of nine points from May 2014.
“Despite this month’s slight dip, builder confidence in the new home market remains above the 50-point benchmark,” said Tom Woods, NAHB chairman and home builder from Blue Springs, Missouri. “Overall, the second quarter of 2015 is shaping up to be very solid.”
The NAHB/Wells Fargo HMI results are taken from a monthly survey that the NAHB has been doing for 30 years. The index is able to determine builder perceptions of current single-family home sales and future sales for the next six months ranked “good,” “fair,” or “poor.” Builders are also asked to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” These scores are then used to find a seasonally adjusted index where any number over 50 means that more builders are rating conditions as good.
According to the index, the component that measured future demand rose one point to 64, the highest level so far this year. Buyer traffic dropped by one point to 39, and the component measuring current sales dropped two points to 59 but remained well above the tipping point of 50. Low rates and pent up demand can be credited as the main reasons that these numbers are pushing builders’ future forward. Home inventories are up since the bottom in mid-2012 and are at their peak since spring 2010.
Looking at three-month moving averages for regional HMI scores, the South and Midwest each rose one point to 57 and 55, respectively, the index notes. The West dropped three points to 55 and the Northeast fell by one point to 41.
“Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” said David Crowe, NAHB chief economist. “On the bright side, the HMI component measuring future sales expectations has been tracking upward all year, mortgage rates remain low, and house prices are affordable. These factors should spur the release of pent-up demand moving forward.”
View the full index results here: NAHB.org