Confidence Among Homebuilders in U.S. Held Steady in May

Confidence among U.S. homebuilders held steady in May, signaling limited progress in residential real estate during the busy spring selling season, National Association of Home Builders/Wells Fargo data showed Monday.

Key Points

  • Builder sentiment gauge unchanged at 58, where it’s been for four straight months. Readings greater than 50 indicate more respondents reported good market conditions
  • Median forecast in a Bloomberg survey of economists projected 59
  • Gauge of prospective buyer traffic held at 44 in May, while index of current sales was also steady at 63
  • Measure of the six-month sales outlook rose to 65, highest this year, from 62

Big Picture

The figures suggest homebuilding won’t add much more to U.S. growth in coming months even with mortgage rates at the lowest levels in three years. Economists had been looking for gains in residential construction to give the economy a much-needed leg up as manufacturing was weighed down by weak growth abroad and the still relatively strong dollar. Housing, which was at the center of the last recession, wasn’t able to fulfill its role as a spark to the early phase of the expansion.

Economist Takeaways

  • “The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” NAHB Chief Economist Robert Dietz said in a statement. “Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector.”
  • “There remains a big disconnect between what homebuilders are saying and what they are actually doing,” Joshua Shapiro, chief U.S. economist at MFR Inc. in New York, said in research note. “We expect housing starts to largely tread water” in coming months.
  • “The failure of the index to recover at all after it fell three points in February is puzzling and disappointing,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd. in Newcastle, UK, said in a research note. “We remain of the view that home sales are likely to rise over the next few months, but housing is not going to be a major driver of the whole economy.”

The Details

  • Sentiment among builders in Northeast dropped to lowest level since June 2014
  • Confidence climbed in South and Midwest and was unchanged in West
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