Builder confidence in the market for newly-built single-family homes increased seven points to 37 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released Monday. The rise in builder sentiment follows the largest single monthly decline in the history of the index in April.
The NAHB said the designation of home construction as an essential business during the crisis helped keep most residential construction workers on the job, which is reflected in the May HMI. At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through social media, virtual tours and online closings. Jurisdictions are also adapting to the new environment with third-party and virtual inspection rules.
Low interest rates are helping to sustain demand, the trade group said. "As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen. Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks. However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors."
All the HMI indices posted gains in May. The HMI index gauging current sales conditions increased six points to 42, the component measuring sales expectations in the next six months jumped 10 points to 46 and the measure charting traffic of prospective buyers rose eight points to 21.
Looking at the monthly average regional HMI scores, the Midwest increased seven point to 32, the South rose eight points to 42 and West posted a 12-point gain to 44. The Northeast fell two points to 17.
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