Homebuilder confidence rebounds in May

ConDig (15-May-17).  Builder optimism in the market for newly-built single-family homes rebounded in May after edging lower in April, according the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The HMI increased two points in May to a level of 70, which is the second highest HMI reading since the housing market downturn.

Scores over 50 indicate that more builders view conditions as good rather than poor.

“This report shows that builders’ optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor,” said NAHB chairman Granger MacDonald.

The index charting sales expectations in the next six months jumped four points to 79, while the index gauging current sales conditions increased two points to 76. But the index measuring buyer traffic edged one point down to 51.

With the future sales condition component of the index hitting its highest level since June 2005, the NAHB said it expects demand for new construction to gain strength in the near-term as existing home inventory remains tight.

The three-month moving averages for HMI scores posted gains in three out of the four regions. The Northeast and South each registered three-point gains to 49 and 71, respectively, while the West rose one point to 78. The Midwest was unchanged at 68.

The HMI index fell three points in April from the month prior to 68.

Strong market conditions continue to support earnings at many US homebuilders amid robust demand and languishing inventory levels, while mortgage rates remain near historic lows despite recent moves higher.

But there are concerns that growth in the housing sector this year could be dogged by further rises in mortgage rates that could leave many price-sensitive first-time buyers on the sidelines of the market, while labor and material costs continue to be elevated.

Latest Commerce Department figures show that housing starts dropped 6.8% last month to a seasonally adjusted annual rate of 1.215 million, but were still up 9.2% on the year-ago period of 1.113 million.