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Builder confidence falls again in May to 12-month low

NAHB: Builders now facing market reality

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Builder confidence in the market for newly built, single-family homes in May fell one point to 45, from a downwardly revised April reading of 46, on the National Association of Home Builders/Wells Fargo Housing Market Index released Thursday.

The reading is now at a 12-month low, and this is the fifth month in a row that the index missed expectations.

“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,” said NAHB chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “However, builders expressed some optimism that sales will pick up in the coming months.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “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 conditions as good than poor.

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

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.

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