Builder confidence rises due to demand and limited supply: NAHB

Builder confidence for newly built single-family homes rose three points to 66 in May, according to the latest data released Thursday by the National Association of Home Builders and Wells Fargo.

“Builders are busy catching up after a wet winter, and many characterize sales as solid, driven by improved demand and ongoing low overall supply,” NAHB Chairman Greg Ugalde said in a statement. “However, affordability challenges persist and remain a big impediment to stronger sales.”

The Housing Market Index (HMI) is a weighted average of separate indices for three single-family data points. It asks respondents to rate the market conditions for the sale of new homes at present and in the next six months, as well as the traffic of prospective buyers of new homes. It falls in a range of 0-100.

Builder confidence has risen steadily since hitting a three-year low in December. 

Every index tracked posted gains in May. The index measuring current sales conditions rose to 72, the index measuring expectations over the next six months rose to 72 and the index measuring buyer traffic rose to 49.

Lower mortgage rates hovering around 4 percent in conjunction with ongoing job growth and rising wages have contributed to a gradual improvement in the market place, according to NAHB Chief Economist Robert Dietz.

“At the same time, builders continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability,” Dietz added.

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