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Confidence among US homebuilders fell in May

[WASHINGTON] Confidence among U.S. homebuilders unexpectedly fell in May, reflecting cooling sales and slower buyer traffic, a sign the residential real-estate market will take time to gain momentum.

The National Association of Home Builders/Wells Fargo sentiment gauge dropped to 54 this month from 56 in April, figures from the Washington-based group showed on Monday. Readings greater than 50 mean more respondents report good market conditions.

The drop in confidence helps explain why builders such as DR Horton Inc are trying to offer more lower-priced homes in a bid to attract customers waiting to see if the economy rebounds from a first-quarter slump. At the same time, construction chiefs became more optimistic about the future as still-low mortgage rates and an improving job market underpin the market.

"We had a string of poor economic data that may have weighed on sentiment," said Ryan Sweet, senior economist at Moody's Analytics Inc. in West Chester Pennsylvania, who projected the index would drop. "The fundamental drivers of housing demand support a pickup in the second half. Builders' collective psyche remains fairly solid."

Market voices on:

The group's gauge of prospective buyer traffic declined to 39 from 40 the prior month, while the index of current single- family home sales decreased to 59 from 61.

The measure of the six-month sales outlook improved to 64, the highest so far this year, from 63.

"Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home," David Crowe, NAHB chief economist, said in a statement. "On the bright side, the HMI 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."