Home builder confidence hits a 7-month high in May as housing market headwinds ease
The numbers: The National Association of Home Builders’ monthly confidence index jumped three points to 66 in May, the trade group said Wednesday. That was the highest reading since October.
The May increase beat the Econoday consensus for a one-point rise.
Any reading over 50 signals improvement.
What happened: Builder confidence slid throughout 2018 as conditions in the housing market darkened, but it’s perked up over the past few months.
In May, the index sub-gauge that tracks current sales conditions jumped three points to 72, the component that measures expectations over the next six months ticked one point higher to 72, and the index of buyer traffic rose two points to 49.
Related: Housing market is tipping in favor of buyers, real-estate agents say
Big picture: Economists use the NAHB’s index as a gauge of likely home building industry activity. If builders are more confident in market conditions, they’re more likely to break ground on more houses, leading to more jobs and overall economic activity.
Builder sentiment still has some ground to make up: the 2019 average for the index is 62, down sharply from 2018’s 67. Indeed, in March, builders started the fewest homes in nearly two years.The Commerce Department will report on April starts Wednesday.
What they’re saying: “We would look and see that some of the demand that was displaced in the fall will probably elongate a selling season this year in the spring and into early summer as those buyers have returned and more continue to come into the market, seeing it’s still a great time to buy a home,” said Michael Murray, chief operating office of D.R. Horton, Inc.DHI, +0.32% , when the company reported quarterly earnings in late April.
Lower mortgage rates are helping housing demand, NAHB Chief Economist Rob Dietz said in a statement. But the industry group says its members are still struggling with higher labor and material costs, the latter thanks to President Trump’s trade tariffs.
Market reaction: Publicly traded home builders are having a terrific year. Shares of LGI Homes, IncLGIH, +0.34% are up more than 56% for the year to date, while the iShares U.S. Home Construction ETFITB, +0.29% has gained more than 27% in that time.
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