Builder confidence posted a modest gain in May despite persistent affordability challenges and economic uncertainty. The National Association of Home Builders (NAHB) Housing Market Index (HMI) rose 3 points from April to 37 this month, marking the 25th consecutive negative reading. The latest reading was higher than the forecast of 34.
The National Association of Home Builders Housing Market Index is a gauge of builder opinion on the relative level of current and future single-family home sales. The data is collected from a monthly survey of about 900 home builders asking respondents to, "rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes." It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.
Here are a few quotes from the press release:
“The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “However, efforts in the House to modify the 21st Century ROAD to Housing Act could increase the nation’s housing supply and help ease builder concerns.”
“Recent increases for long-term interest rates will continue to hold back home buyer demand,” said NAHB Chief Economist Robert Dietz. “Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges.”
Here is the historical series, which dates from 1985.
Components of the the NAHB Housing Market Index
The NAHB Housing Market Index is calculated based off of three components: current sales, expected sales in the next six months, and traffic of prospective buyers. Here are the readings for May:
- Current sales rose three points to 40.
- Expected sales in the next six months rose three points to 45.
- Traffic of prospective buyers rose three points to 25.
Housing Market Index: Regional Breakdown
The chart below gives a regional breakdown of the NAHB HMI in four regions of the country: Northeast, Midwest, South, and West. Here are the readings for May:
- The Northeast rose five points to 44.
- The Midwest rose six points to 45.
- The South rose two points to 36.
- The West rose one point to 27.
