Builder Confidence Posts Solid Gain Following Historic Low
WASHINGTON – In a sign that the housing market is stabilizing and gradually moving forward during the COVID-19 pandemic, builder confidence in the newly-built single-family homes market increased seven points to 37 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
However, that May rise in builder sentiment follows April’s drop – the largest single monthly decline in the index’s history.
“The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey,” says NAHB Chairman Dean Mon. “At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes … through innovative measures such as social media, virtual tours and online closings.”
“Low interest rates are helping to sustain demand,” adds NAHB Chief Economist Robert Dietz. “As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen.”
Dietz says other signs point to a housing rebound for new homes. He points to stronger mortgage-application data for four weeks in a row and higher buyer traffic in the housing market. “However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors,” he says
All the HMI indices posted gains in May. The HMI index gauging current sales conditions increased six points to 42, the component measuring sales expectations in the next six months jumped 10 points to 46 and the measure charting traffic of prospective buyers rose eight points to 21.
Looking at the monthly average regional HMI scores, the Midwest increased seven point to 32, the South rose eight points to 42 and the West posted a 12-point gain to 44. However, the Northeast fell two points to 17.
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.
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