NAHB: Builder Confidence Dives in May

May’s HMI reading fell eight points in May to a measure of 69, keeping the index below the 80-point mark for a third consecutive month. It was also the lowest reading since June 2020.

“Housing leads the business cycle and housing is slowing,” said Jerry Konter, NAHB’s chairman as well as a builder and developer in Savannah, Ga. “The White House is finally getting the message and yesterday released an action plan to address rising housing costs that emphasizes a very important element long-advocated by NAHB – the need to build more homes to ease the nation’s housing affordability crisis.”

The NAHB/Wells Fargo HMI survey 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.

All three major HMI indices posted major losses in May, the report said. The HMI index gauging current sales conditions fell eight points to 78, and the gauge measuring sales expectations in the next six months dropped 10 points to 63. The component charting traffic of prospective buyers posted a nine-point decline to 52.

“The housing market is facing growing challenges,” NAHB chief economist Robert Dietz said. “Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high, and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry-level and first-time homebuyers are especially bearing the brunt of this rapid rise in mortgage rates.”

Looking at the three-month moving averages for regional HMI scores, the Northeast held steady at 72 while the Midwest dropped seven points to 62. The South fell two points to 80 and the West posted a six-point decline to 83.

By David Schollaert, David@SteelMarketUpdate.com