Homebuilder Confidence Gathers Steam in May

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The National Association of Home Builders (NAHB)/Wells Fargo housing market index (HMI) for May rose two points from the April reading of 68 to 70. The HMI posted an 18-year high of 74 in December 2017. Economists polled by Bloomberg were expecting an index reading of 70 for May.

An index reading above 50 indicates that more builders view sales conditions as good than view them as poor. NAHB Chair Randy Noel said that while demand is boosting builders’ optimism, record-high lumber prices are making it difficult for builders to construct new homes for entry-level buyers. Since January, lumber futures have risen by nearly 50% and now trade at about double the price of just two years ago.

The current sales conditions subindex for May rose from 74 to 76 and the subindex that estimates prospective buyer traffic was unchanged at 51. The subindex measuring sales expectations for the next six months also remained unchanged at 77.

NAHB chief economist, Robert Dietz, said:

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.

The three-month moving average indexes dipped in two of four NAHB regions and were unchanged in two others. In the Midwest and South, the indexes slipped a point to 65 and 76, respectively. In the West and Northeast, indexes were unchanged at 76 and 55, respectively.