May Home Builder Confidence on Upswing

Builder confidence for newly built single-family homes rose by two points in May to 70, the National Association of Home Builders reported yesterday.

The NAHB/Wells Fargo Housing Market Index reached 70 for the fourth time this year, following a slight decrease in April. The measure gauging current sales conditions increased by 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.

Regionally, 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.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., noted strength was broad based, including most geographies and price points. “While the strength in sales is encouraging, builders remain concerned about rising raw material materials and the continued difficulty finding skilled workers and competitively priced lots,” he said.

“Builders are buoyed by growing consumer demand for single-family homes,” said NAHB Chief Economist Robert Dietz. “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 formula weighs any number over 50 as an indication that more builders view conditions as good than poor.