National Home Builder Confidence Index Climbs to 70 in May

Mindy Sparks
May 17, 2018

A home under construction in Boise. "New homes are an important addition in neighborhoods across the country, since many homeowners don't want to list their home for sale out of fear of not finding a new home that fits their needs".

Homebuilder confidence in the U.S. unexpectedly improved in the month of May, according to a report released by the National Association of Home Builders on Tuesday.

Although disappointing month-over-month, National Association of Home Builders (NAHB) Chairman Randy Noel lent perspective, stating "We expected some pullback this month after such a strong March report, but housing starts remain at very healthy levels in April".

Industrial production rose again in April for the third consecutive month, according to Federal Reserve figures issued Wednesday, while separate reports show a decline in new home sales and a smaller gain in retail sales. Anything over a 50 indicates "more builders view conditions as good than poor". The index has remained above 60 since September 2016.

May's index exceeded expectations for a reading of 69, according to FactSet. A measure of buyer traffic held steady at 51. "With these fundamentals in place, the housing market should improve at a steady, gradual pace in the months ahead".

April home-building was in the red, with housing starts tumbling 3.7 percent to 1.34 million-but, single-family starts were up, 0.1 percent to 894,000, according to the Commerce Department.

Sentiment remains close to an 18-year high, with unemployment below 4% for the first time since 2000, and government tax cuts signed into law in December potentially helping motivate some consumers to purchase a home this year.

Current and would-be home buyers have reason to celebrate. Listings for existing homes sank to the lowest levels on record for March.

Capacity utilization for the industrial sector climbed 0.4 of a percentage point in April to 78%, a rate that is 1.8 percentage points below its 1972-2017 average. This is the fourth time the HMI has reached 70 or higher this year. A year ago, the rate averaged 4.05 percent.

The Fed has signaled that it will raise rates twice more this year, after having done so initially in March, and most economists foresee the next increase in June.

"However, the record high cost of lumber is hurting builders' bottom lines and making it more hard to produce competitively priced houses for newcomers to the market", he added. They've also been hampered by a lack of ready-to-build land.

Other reports by Iphone Fresh

Discuss This Article