A gauge of homebuilder confidence climbed to its highest level in seven months in May as lower mortgage rates and solid sales boosted optimism among America’s homebuilders.
The National Association of Homebuilders’ Housing Market Index rose three points to 66 in May and topped economists’ expectations for 64, according to a Thomson Reuters survey. That marked the highest level since October 2018.
“Builders are busy catching up after a wet winter and many characterise sales as solid, driven by improved demand and ongoing low overall supply,” said NAHB chairman Greg Ugalde. However, he added that affordability challenges remain an impediment to home sales.
Mortgage rates have clambered down this year and are currently hovering around 4 per cent — having peaked near 5 per cent in the fourth quarter — after the Federal Reserve in March ditched its forecast of at least two rate rises this year. Fed chair Jay Powell reiterated his wait-and-see stance after he said earlier this month that the central bank sees no immediate need to move interest rates in either direction.
Lower rates and higher incomes have boosted housing activity but ongoing labour and land shortages and rising material costs are holding back inventory and pushing up home prices.
Homebuilder exchange traded funds ITB and XHB were both little changed after the report.