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Homebuilders are becoming more confident with the housing market

But labor and material cost concerns still weigh heavy

Despite affordability and labor constraints, homebuilder confidence rose to 66 points in May, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

“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.  “However, affordability challenges persist and remain a big impediment to stronger sales.”

In May, the index measuring current sales conditions rose from 69 to 72 points, while buyer traffic increased from 47 to 49. Lastly, expectations over the next six months rose from 71 to 72 points. 

The three-month moving averages for regional HMI scores show the Northeast rose six points from 51 to 57 points, the South also moved forward from 67 to 68, the West inched forward from 69 to 71 points and the Midwest gained one point from 53 to 54 points.

Mortgage rates are hovering just above 4% following a challenging fourth quarter of 2018 when they peaked near 5%. This lower-interest rate environment, along with ongoing job growth and rising wages, is contributing to a gradual improvement in the marketplace,” NAHB Chief Economist Robert Dietz said.  “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.”

NOTE: The NAHB/Wells Fargo Housing Market Index gauges builder opinions of single-family home sales and expectations, asking for a rating of good, fair or poor. Builders are also asked to rate prospective buyer traffic from very low to very high. The scores are used to calculate a seasonally adjusted index with a rating of 50 or over indicating positive sentiment.

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