NAHB Housing Market Index (HMI) Continues to Strengthen in May

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) came in at 70, the second highest HMI reading since the downturn. The medium forecast called for a reading of 68.

“This report shows that builders’ optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months. The respondents are asked to choose between “good,” “fair” or “poor.” The HMI also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” A seasonally adjusted index over 50 indicates that more builders view conditions as good than poor.

“The HMI measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market,” said NAHB Chief Economist Robert Dietz. “Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward.”

Two of the three components in the HMI posted gains in May, including the index gauging sales expectations in the next six months and the index gauging current sales conditions. The two jumped four points to 79 and two points to 76, respectively.

The component measuring buyer traffic ticked down slightly by one point to 51.

The three-month moving averages for HMI scores posted gains in three out of the four regions. The Northeast and South each registered three-point gains to 49 and 71, respectively, while the West rose one point to 78. The Midwest was unchanged at 68.