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Home builder confidence hits 5-year high in May

BLOOMBERG FILE PHOTO/DANIELACKER
BUILDER CONFIDENCE in the market for newly built, single-family home reached the highest reading since May 2007, according to the National Association of Home Builders. Lumber sits outside a partially completed single-family home under construction in Bloomington, Ill.
Posted 5/15/12

WASHINGTON – Builder confidence in the market for newly built, single-family home reached 29 this month on the National Association of Home Builders/Wells Fargo Housing Market Index, the highest reading since May 2007, according to the National Association of Home Builders.

“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” Barry Rutenberg, chairman of the NAHB said in prepared remarks.

“It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase,” he added.

The NAHB’s monthly survey gauges the perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

The survey also asks home builders to rate traffic of perspective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are used to calculate a seasonally adjusted index in which any number greater than 50 indicates that more builders view conditions as good rather than poor.

“While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back,” said NAHB Chief Economist David Crowe.

This month, each of the index’s components rebounded from declines in April. Sales conditions and traffic of prospective buyers each rose five points in May to 30 and 23, respectively - the traffic component hit the highest level since April 2007.

According to NAHB, the component gauging sales expectations in the next six months rose three points to 34.

Three out of four regions registered improving builder sentiment in May. The Northeast made the biggest gain with a six-point increase to 32. The Midwest and the South each gained five points to 27 and 28 points, respectively. The West posted a two-point decline to 29 during May.

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