Builder sentiment rebounds from April lows
(MoneyWatch) Builders are feeling better about the market for newly built, single family homes than they have since 2007, according to the National Association of Homebuilders (NAHB).
The NAHB/Wells Fargo Housing Market Index (HMI), released Tuesday, showed overall builder confidence rose five points in May to reach a level of 29. Any number over 50 indicates more builders view conditions as "good" than "poor" - so a reading of 29 suggests that builders do not view the marketplace as anywhere close to normal.
Still, this was the index's strongest overall reading since May 2007. April's number was revised downward.
The HMI gauges builder opinion on a variety of issues, including current single-family home sales, sales expectations for the next six months and traffic of prospective buyers. These scores are used to calculate the seasonally adjusted index.
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Builder perceptions of current single-family home sales and sales expectations for the next six months are gauged as "good," "fair" or "poor." Traffic is rated as "high to very high," "average" or "low to very low."
All components of the index rebounded from last month's declines. The measure of builder sentiment regarding current sales conditions and traffic of prospective buyers each rose five points in May, to 30 and 23, respectively. According to those numbers, builders are feeling better about buyer traffic than they have since April 2007.
Builders' expectations for sales in the next six months also bounced back May, rising three points to 34.
"While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back," NAHB chief economist David Crowe said in a press release. "The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices."
"Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April," Barry Rutenberg, chairman of NAHB and a home builder in Florida, said in the same release. "It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase."
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Three out of four regions showed improving builder sentiment in May: The Northeast registered a six-point gain to 32, and the Midwest and South recorded five point gains to 27 and 28, respectively. Only in the West did sentiment decline, falling two points in May to 29.
