Homebuilders More Pessimistic in May

Builders are backing off optimism to bring sentiment "more in line with the market reality," says National Association of Homebuilders.

May 15, 2014 at 1:52PM

Homebuilder confidence edged down in the most recent month, according to the May National Association of Home Builders/Wells Fargo Housing Market Index report released today. 

After clocking in at a revised 46 points for April, May's reading edged down even further to 45, dashing analyst hopes for a recovery to 49. The number had been at 46 since a 10-point drop in February. In May 2013, the index clocked in at 44. 

Any number over 50 indicates that more builders view sales conditions as good than poor, a point reached in June 2013 for the first time  since April 2006. The survey looks at builder confidence in newly built single-family homes. 

"After four months in which the HMI has shown little signs of fluctuation, it is clear that builder sentiment is becoming more in line with the market reality of a continuing but modest recovery," said National Association of Home Builders Chairman Kevin Kelly in a statement today.

Digging deeper into components, May's index sent mixed messages. While current sales conditions dropped two points to 48, prospective buyer traffic squeaked up two points to 33. As a sign of expected better times ahead, future sales expectations for the next six months increased one point to 57.

NAHB Chief Economist David Crowe noted: "Builders are waiting for consumers to feel more secure about their financial situation. Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence." If the last two strong jobless claims reports are any evidence, a labor market recovery may be underway.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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