As some sales activity picked up toward the end of the spring season, with housing starts seeing an unexpected boost, the latest data from the National Association of Home Builders (NAHB) observed a slight pickup in homebuilder confidence.
However, as market and economic challenges persist, builders still remain overwhelmingly cautious about their businesses.
The May NAHB/Wells Fargo Housing Market Index (HMI) saw homebuilder confidence grow three points to 37. Additionally, all three of the HMI’s major indices saw gains in May: the HMI index gauging current sales conditions rose three points to 40 from April to May, 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.
While this month’s rise is a reversal from April’s four-point fall and leans slightly closer to the 50-point breakeven mark, confidence remains in the negative territory due to “the housing market (continuing) to face significant affordability challenges,” as stated by NAHB Chief Economist Robert Dietz.
NAHB Chairman Bill Owens outlined “higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran,” as reasons for continued challenges in buyer demand.
However, Owens noted that modifications from the House of Representatives to the 21st Century ROAD to Housing Act could “increase the nation’s housing supply and help ease builder concerns,” as NAHB and other industry advocates push for lawmakers to approve the sprawling legislation following tweaks to the bill’s restrictions on build-to-rent properties.
In the meantime, though, builder confidence remains mixed and variable by region. Taking a look at the three-month moving averages, the Midwest rose one point to 43, the Northeast rose one point to 42, the South held constant at 35 and the West fell one point to 28.
In line with continued challenges to the housing construction industry, builders continue to cut prices and offer incentives in order to sell new homes. With some improvements in affordability as of late, less builders reported cutting prices, down from 36% in April to 32% in May. The use of sales incentives was also essentially flat from 60% in April to 61% in May, but this marks the 14th consecutive month this share has reached 60% or higher. Additionally, the average price reduction saw a slight increase, from 5% to 6%.
