Economic Snapshot: Builder confidence flat in May

The Housing Market Index was unchanged this month but is at a healthy level for the index. While housing starts were up in April, housing completions are down and starts are below annual levels.

Housing market index
Builder confidence for newly-built single-family homes remained unchanged in May at a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index.

The HMI component measuring sales expectations in the next six months increased three points to 65. The components charting current sales conditions and gauging buyer traffic held steady at 63 and 44, respectively.

“The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” said NAHB Chief Economist Robert Dietz. “Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward.”

Looking at the three-month moving averages for regional HMI scores, the South and Midwest both registered one-point gains to 59 and 58, respectively. The West remained unchanged at 67 and the Northeast fell three points to 41.

Housing starts

Privately owned housing starts were at a seasonally adjusted annual rate of 1,172,000 in April. This is 6.6 percent above the revised March estimate of 1,099,000 but is 1.7 percent below the April 2015 rate of 1,192,000.

Single-family housing starts were at a rate of 778,000 in April. This is 3.3 percent above the revised March figure of 753,000.

Privately owned housing completions were at a seasonally adjusted annual rate of 933,000 in April. This is 11.0 percent below the revised March estimate of 1,048,000 and is 7.4 percent below the April 2015 rate of 1,008,000.

Single-family housing completions were at a rate of 691,000 in April. This is 3.6 percent below the revised March rate of 717,000.

According to Bill McBride of the Calculated Risk blog, the key takeaway from this month’s report is that multi-family is slowing and single-family growth is ongoing year-over-year.

“I think most of the growth in multi-family starts is probably behind us – in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) – although I expect solid multi-family starts for a few more years,” he said.