Home Builders Are Less Confident

May 19, 2015

Builder confidence over the newly built, single-family home market fell this month, but housing analysts are attributing it to overly cautious home buyers.

Builder confidence fell two points in May to a level of 54, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Still, a reading over 50 indicates more builders view conditions as "good" than "poor."

"Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home," says NAHB Chief Economist David Crowe. "On the bright side, the [index] component measuring future sales expectations has been tracking upward all year, mortgage rates remain low, and house prices are affordable. These factors should spur the release of pent-up demand moving forward."

The index gauges builders' perceptions over current and future sales. For sales expectations over the next six months, the index rose one point to 64 while the index component measuring buyer traffic dropped one point to 39. The component measuring current sales conditions dropped two points in May to 59.

Builders seem to be the most upbeat in the South and Midwest, in which the index rose to 57 and 55, respectively. In the Northeast, the index dropped one point to 41 and dropped three points in the West to 55.

Source: National Association of Home Builders