Real Estate

Homebuilder sentiment unchanged for 4 months

Builder confidence flat

U.S. homebuilders are feeling positive about the current housing market, but their level of confidence hasn't moved in four months.

A monthly index of sentiment by the National Association of Home Builders (NAHB) registered 58 yet again in May. Fifty is the line between positive and negative sentiment. The index stood at 54 one year ago and hit a recent high of 65 last October.

"Builder confidence has held steady at 58 for four straight months, which indicates that the single-family housing sector remains in positive territory," said NAHB Chairman Ed Brady, a homebuilder and developer from Bloomington, Illinois. "However, builders are facing an increasing number of regulations and lot supply constraints."

A worker measures wood for a house under construction at the KB Home Vineyard Crossing Community in Livermore, California.
David Paul Morris | Bloomberg | Getty Images

Of the three index components, both current sales conditions and buyer traffic were unchanged at 63 and 44, respectively. The index measuring sales expectations over the next six months rose three points to 65.

"The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen," said NAHB Chief Economist Robert Dietz. "Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward."

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Mortgage rates fell to the lowest level in three years last week, according to Freddie Mac. That gives buyers additional purchasing power, but rising home prices are outpacing that advantage. Supplies of existing homes for sale are extremely low, and builders are concentrating their efforts on the high end of the market. They say they are unable to build lower-priced homes due to the high costs of land, labor and regulation.

On a three month moving average, homebuilder confidence in both the South and Midwest increased one point to 59 and 58, respectively. The West remained unchanged at 67 and the Northeast fell three points to 41.

Single family housing starts in March were nine percent lower than February, according to the U.S. Census, and are running well below historical averages. Building permits also fell in March. This as demand for housing rises in the usually busy spring season. Housing starts and permits are expected to rise slightly in April. Those numbers are scheduled for release Tuesday at 8:30 a.m. ET.