Builder confidence in the market for newly built single-family homes improved slightly this month, with the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rising three points to a reading of 37. Any HMI number under 50 indicates that more builders view conditions poor rather than good.
All three of the major HMI indices posted gains in May. The HMI index gauging current sales conditions rose three points to 40 from April to May, while the index measuring future sales increased three points to 45 and the index charting traffic of prospective buyers posted a three-point gain to 25.
Looking at the three-month moving averages for regional HMI scores, the Midwest registered a one-point gain to 43, the Northeast rose one point to 42, the South was unchanged at 35 and the West fell one point to 28.
The latest HMI survey also found 32% of builders cut prices in May, down from 36% in April. The average price reduction was 6%, up from the 5% figure in April. The use of sales incentives was 61% in May, up slightly from 60% in April, and marked the 14th consecutive month this share has reached 60% or higher.
“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 homebuyer demand,” added 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.”
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