US homebuilder sentiment rises to 10-month high in May
US HOMEBUILDER sentiment rose to a 10-month high in May as tight housing supply boosted demand for new construction, according to a survey on Tuesday (May 16) that also showed tightening credit conditions were becoming a challenge.
The National Association of Home Builders (NAHB)/Wells Fargo housing market index increased five points to a reading of 50 this month. The fifth straight monthly increase lifted the index to the midpoint mark of 50 for the first time since July 2022.
Economists polled by Reuters had predicted the index would be unchanged at 45.
“New home construction is taking on an increased role in the marketplace because many homeowners with loans well below current mortgage rates are electing to stay put, and this is keeping the supply of existing homes at a very low level,” said NAHB chairman Alicia Huey in a statement.
Huey said despite the rising optimism, builders continued to face challenges to meet growing demand for new homes.
“These include shortages of transformers and other building materials, and tightening credit conditions for residential real estate development and construction brought on by the actions of the Federal Reserve to raise interest rates,” said Huey.
The housing market has been the biggest casualty of the Fed’s fastest monetary policy tightening campaign since the 1980s aimed at taming inflation.
According to the survey, the share of builders reducing home prices dropped to 27 per cent from 30 per cent in April. This share was as high as 36 per cent last November. The average price reduction remained at 6% per cent unchanged for the past four months.
About 54 per cent of builders offered some type of incentive to bolster sales, down from 59 per cent in April and 62 per cent last December. REUTERS
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