Home Builder Confidence Remains Below Par

By: Jann Swanson

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell one point in May to 45 from the April reading which was revised from 47 to 46.  The HMI is a measure of home builder confidence in the new home market and it has remained under 50 since February, indicating that more builders view market conditions as unfavorable than view them as good.

 

 

NAHB Chairman Keven Kelly spoke about the HMI's recent negative stability. "After four months in which the HMI has shown little signs of fluctuation, it is clear that builder sentiment is becoming more in line with the market reality of a continuing but modest recovery.  However, builders expressed some optimism that sales will pick up in the coming months."

"Builders are waiting for consumers to feel more secure about their financial situation," NAHB Chief Economist David Crowe said. "Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence."

NAHB conducts its monthly survey among its new home builder members asking them for their perceptions of current single-family home sales and their expectations for sales over the next six months as "good," "fair" or "poor."  Builders are also asked to rate current prospective buyer traffic as "high to very high," "average" or "low to very low."  The responses to each question are used to construct individual 100 point indices and a composite (the HMI). 

The index's components were mixed in May. The component gauging sales expectations in the next six months rose one point to 57 and the component measuring buyer traffic increased two points to 33. The component gauging current sales conditions fell two points to 48.

Looking at the three-month moving averages for regional HMI scores, the South rose one point to 48 while the Midwest fell a single point to 47 and the West posted a four-point drop to 47. The Northeast held steady at 33.