Builder Confidence Improves in May, Ending Four-Month Slide

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index IMPROVED two points in May to 70;
  • The index of current sales ROSE two points to 76, the other index components — future (six months hence) sales and the index of buyer traffic – were flat to April;
  • By region, builder confidence FELL one point in the South and the West while improving five points in the Midwest and remaining flat in the Northeast.


  • Overall index rose for the first time this year;
  • The index reading for April was revised down one point to 68, exaggerating the May jump;
  • The index has been positive (i.e. over 50) for 47 straight months

Data Source: National Association of Home Builders 

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After a dismal start to the year, with builder confidence – measured by The National Association of Home Builders (NAHB) Housing Market Index (HMI) – finally improved in the first 10 days of May, reflecting increases in both new and existing home sales.

New home sales, measuring contracts for the purchase of new single-family homes, improved for the second straight month in March according to latest Census Bureau data. The report of new home sales for April will be released next week.

Total residential permits improved in March (April data will be released tomorrow) although the increase was confined to multi-family structures; the annualized rate of single-family permits fell in March and has dipped in two of the first three months this year.

Housing starts followed a similar pattern in March: the total for all housing increased but single-family starts dropped.

The tax bill signed by President Trump in December reduced some tax incentives for home ownership by capping mortgage interest deductions and the deduction for local property taxes.

At the same time, the inventory of new homes for sale continues to inch up. The (annualized rate) of new homes for sale was 301,000 in March, matching February, up 13.2 percent from March 2017 and the largest since March 2009 (311,000).

The relatively high inventory of unsold homes would tend to discourage new building.

The dip in confidence coincided with a steady increase in mortgage rates. Freddie Mac reported last Thursday the rate for a 30-year fixed rate mortgage was 4.55 percent, up from 4.05 percent a year ago

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. Follow Mark Lieberman on Twitter at @ foxeconomics.


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