Single-family Home Builder Confidence Remains Strong in May

The NAHB/Wells Fargo Housing Market Index (HMI) rose two points in May to 70 - snapping a streak of declines - and is back near its cycle high

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Builder confidence in the market for newly-built single-family homes rose two points to a level of 70 in May after a downwardly revised April reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the fourth time the HMI has reached 70 or higher this year.

Builderconfidence rose 2 points in May to 70, marking the fourth month this year the HMI has been at or above 70 points.Builderconfidence rose 2 points in May to 70, marking the fourth month this year the HMI has been at or above 70 points.National Association of Home BuildersThe solid May report shows that builders are buoyed by growing consumer demand for single-family homes. Tight housing inventory, employment gains and demographic tailwinds should continue to boost demand for newly-built single-family homes. With these fundamentals in place, the housing market should improve at a steady, gradual pace in the months ahead. However, the record-high cost of lumber is hurting builders’ bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market.

The present sales index accounted for all of May’s increase, climbing 2 points to 76.The present sales index accounted for all of May’s increase, climbing 2 points to 76.Wells Fargo Securities

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.

The HMI chart gauging current sales conditions increased two points to 76 in May while the indexes measuring buyer traffic and expectations in the next six months remained unchanged at 51 and 77, respectively.

Confidence is highest in the West and South, where job growth has been the strongest and population gains are running ahead of new construction. Demand also picked up in the Midwest, as spring finally arrived. The Northeast HMI was unchanged at 55.Confidence is highest in the West and South, where job growth has been the strongest and population gains are running ahead of new construction. Demand also picked up in the Midwest, as spring finally arrived. The Northeast HMI was unchanged at 55.Wells Fargo Securities

Looking at the three-month moving averages for regional HMI scores, the West and Northeast held steady at 76 and 55, respectively. Meanwhile, the South and Midwest each edged down one point to respective levels of 72 and 65.

The HMI tables can be found at nahb.org/hmi.

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