Confidence among U.S. builders for new single family homes improved in May to reach 44 points, after dropping slightly in April from the values of March, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
The HMI is a sample based on perceptions of 300 or more builders, which operates as a gauge for determining current housing trends and predicting demand. The HMI is derived by NAHB from a monthly survey that it has been conducting since the past 25 years. It analyzes three main components namely, current sales conditions, sales expectation and prospective buyer traffic. All the three components showed an improvement for the month of May.
According to the survey, current sales went up four points to reach 48 while expected sales inched up a point to 53. The estimated buyer traffic also increased three points to reach 33. Any reading less than 50 indicates that builders consider the sales conditions to be poor.
In the May HMI, builders' confidence is high for estimated sales. Most contractors believe that the stringent supply of homes will accelerate the urgency of buying homes among potential purchasers.
"Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies. This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor," Rick Judson, Chairman of NAHB said in a statement.
As experts are still worrying about construction prices, as forecasted earlier, prices inched down slightly in April. According to the producer price report released by the U.S. Department of Labor, prices of construction materials in the country dropped 0.1 percent in April. Non-residential building material prices are down 0.4 percent, year on year.
Read the producer price report, here.
