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Stronger home sales boost builder confidence in May

Construction on a single family home in Tiskilwa, Illinois.

Daniel Acker | Bloomberg | Getty Images

The nation’s homebuilders are reporting a rebound in sales, and that’s making them more optimistic about the housing market.

Builder confidence in the newly built, single-family home market rose 3 points to 66 in May, according to the latest National Organization of Home Builders/Wells Fargo Housing Market Index. That’s the HMI’s highest reading since October, but lower than last May’s level of 70. Anything above 50 is considered positive.

“Builders are busy catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply,” said NAHB Chairman Greg Ugalde, a homebuilder and developer from Torrington, Connecticut. “However, affordability challenges persist and remain a big impediment to stronger sales.”

Of the index’s three components, current sales conditions, rose 3 points to 72. Sales expectations in the next six months rose 1 point to 72, and buyer traffic moved up 2 points to 49, the only component still in negative territory.

“Mortgage rates are hovering just above 4 percent following a challenging fourth quarter of 2018 when they peaked near 5 percent. This lower-interest rate environment, along with ongoing job growth and rising wages, is contributing to a gradual improvement in the marketplace,” said NAHB Chief Economist Robert Dietz. “At the same time, builders continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”

Regionally, on a three-month moving average, sentiment in the Northeast jumped 6 points to 57; in the West, it rose  2 points to 71; in the Midwest up 1 point to 54; in the South, it gained 1 point to 68.

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