Key Takeaways
U.S. home builder sentiment saw an unexpected improvement in May, though it remains firmly in pessimistic territory as high mortgage rates and persistent inflation continue to challenge housing affordability. The National Association of Home Builders/Wells Fargo Housing Market Index increased to 37 from 34 in April, a level that was forecast to be unchanged.
"The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand," NAHB Chairman Bill Owens, a home builder from Ohio, said in a statement. Home loan costs have climbed since late February after a spike in oil prices revived inflation pressures.
The details of the survey showed a broad, if modest, improvement. The measure of current sales conditions rose to 40 from 37, the gauge of future sales climbed to 45 from 42, and a measure of prospective buyer traffic increased to 25 from 22. Still, a significant share of builders—32 percent—cut prices in May, while 61 percent used sales incentives, the 14th straight month this figure has been at 60 percent or higher.
Although sentiment ticked up, the housing market remains on a weak footing, with sales of existing homes parked near the doldrums seen during the 2007-2009 financial crisis. "Recent increases for long-term interest rates will continue to hold back home buyer demand," said NAHB Chief Economist Robert Dietz, noting that future construction activity may be short-lived after a recent government report showed a sharp drop in new building permits.
This article is for informational purposes only and does not constitute investment advice.
