Builder Confidence Up in May to 8-Month High

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index ROSE three points in May to 66;
  • All three index components INCREASED led by the outlook for current home sales which rose three points;
  • By region, builder confidence INCREASED all four Census Regions, jumping 10 points in the Northeast to 65, the highest level since October 2004 (67).


  • The overall Index has not fallen this year (it was unchanged from February to March);
  • Since slipping at the end of 2018, the Index is at its highest level since last October;
  • The Index has been positive (i.e. over 50) for 59 straight months;
  • Despite recent positive performance, the Index and each of its components, remain down year-year.

Data Source: National Association of Home Builders

Image result for home building

With three straight months of improvement in the pace of new home sales, rose again in May, reaching the highest level since last October.

The improvement in the index came as mortgages interest rates, according to Freddie Mac, fell for the second straight week, with the rate for a 30-year fixed rate loan dipping to 4.10 percent, the lowest level since early April when, at 4.06 percent, it was at its lowest point since mid-January 2018, 4.04 percent.

Counter-intuitively, falling rates could actually slow home sales as potential buyers anticipate that rates could continue to fall and hold off on making mortgage commitments.

That builder confidence is improving was also suggested by a slow but steady increase in the number of residential construction jobs. According to the Bureau of Labor Statistics, residential construction employment rose in April to 2,899,0000, its highest since April 2008.

Other housing related reports are not as optimistic. The most recent report on homeownership, for example, showed the homeownership rate fell in the first quarter, to 64.2 percent, the first quarter-quarter decline in two years. Of particular note, according to the homeownership data, homeownership among younger families decline 1.1 percentage points to 35.4 percent, the lowest level in a year, contributing to the overall decline.

Younger families continue to face challenges, chief among them student loan burdens which affect credit applications and ratings.

Meanwhile, while builder confidence grew, the median price of a new single-family home fell in March to its lowest level in more than two years, a factor which may have contributed to the boost in sales.

Home builders themselves still must overcome an increase in material costs following the imposition of higher tariffs on steel and other construction components.

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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