NEW YORK - Builders’ confidence in the market for new single-family homes surged in May, as the National Association of Home Builders' housing market index - a monthly gauge of builder sentiment – climbed to 22 from April’s 19, the group announced this afternoon.
The index is now at its highest point since August 2007.
Thomson Reuters' poll of economists predicted a level of 20.
“Builders surveyed for the HMI at the beginning of May were undoubtedly reacting to the heightened consumer interest they had just witnessed as the deadline for home buyer tax credits arrived at the end of April,” said NAHB Chairman Bob Jones. “Builders are also hopeful that the solid momentum that the tax credits initiated will continue even now that those incentives are gone.”
“The really encouraging part of today’s HMI is that sales expectations for the next six months continued to gain, despite the expiration of the home buyer tax credits at the end of April,” NAHB Chief Economist David Crowe said. “This means builders are more comfortable that the market is truly beginning to recover, and that positive factors for buying a new home – low interest rates, great selection, stabilizing prices, and a recovering job market – are taking the place of tax incentives to generate buyer demand.”
Crowe noted that while builder confidence improved from the lows posted during the housing downturn, it remains depressed by historic standards. “Obviously we still have a long way to go, and it’s worth repeating that continued challenges such as the critical lack of project financing, inappropriate appraisal procedures, competition from short sales and foreclosures, and the soaring costs of some building materials are major obstacles on the path to a healthier housing market and economy,” he said.
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
All three component indexes rose in May. The current single-family home sales index surged to 23 from 20, and the sales expectations index for the next six months gained to 28 from 25. The traffic of prospective buyers index grew to 16 from 13.
NAHB also announced that beginning next month, the report will be released at 10 a.m., Eastern time.
