Homebuilder Confidence Climbs in May

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The National Association of Home Builders (NAHB)/Wells Fargo housing market index for May rose to 70, up two points from an unrevised April reading of 68. Economists polled by Bloomberg were expecting an index reading of 68.

An index reading above 50 indicates that more builders view sales conditions as good than view them as poor. NAHB chairman Granger MacDonald noted builders optimism in the housing market is “solidifying.” Headwinds include higher material costs and shortages of both building lots and labor.

The current sales conditions subindex for May rose from 74 to 76, and the subindex that estimates prospective buyer traffic dipped a point, from 52 to 51. The subindex measuring sales expectations for the next six months jumped four points from 75 to 79.

The NAHB’s chief economist said:

The HMI measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market. Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward.

In the NAHB’s regions, three-month moving average indexes rose in all four regions. In the Northeast and South, the index rose three points to 49 and 71, respectively; it rose one point to 78 in the West and remained unchanged in the Midwest at 68.

The NAHB/Wells Fargo housing market index has remained in the 60-point range since June of 2015. Prior to mid-2013, the index had not risen to 50 since mid-2006.