Builder confidence in the market for newly-built single-family homes remained unchanged in May at a level of 58 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). While the HMI remains in positive territory, soft economic data for the start of 2016, combined with persistent supply issues including access to building lots and rising regulatory burdens, are having impacts on the single-family construction market.
“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, Ill. “However, builders are facing an increasing number of regulations and lot supply constraints.”
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.
“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.”
Derived from a monthly survey that NAHB has been conducting for 30 years, 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.
Looking at the three-month moving averages for regional HMI scores, the South and Midwest both registered one-point gains to 59 and 58, respectively. The West remained unchanged at 67 and the Northeast fell three points to 41.
NAHB continues to forecast solid growth for single-family starts for the rest of 2016 and into 2017 given low interest rates, positive job creation and a gradual rebuilding of the industry’s infrastructure.
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