Home Builder Sentiment Posts Its First Positive Reading in Nearly a Year

Builder confidence in the market for newly built single-family homes rose 5 points in May to 50, the fifth consecutive monthly increase, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The May reading is also the first measurement of builder sentiment since July that wasn’t negative, which is considered any reading below 50.

Despite financial headwinds, a lack of existing homes for sale is driving up demand for new-construction projects and causing a subsequent boost in home builder sentiment, CNBC reports.

Builders are benefiting from a very lean existing home market. New listings in April were down nearly 22% year over year, according to Realtor.com. With mortgage rates now double what they were a year and a half ago, some potential sellers may be reluctant to trade to another home at a higher rate.

“In March, 33% of homes listed for sale were new homes in various stages of construction. That share from 2000-2019 was a 12.7% average. With limited available housing inventory, new construction will continue to be a significant part of prospective buyers’ search in the quarters ahead,” said Robert Dietz, NAHB’s chief economist.

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