Builder confidence in the market for new single-family construction rose two points in May to a reading of 70 on the latest National Association of Home Builders/Wells Fargo Housing Market Index. It is the second-highest reading since the recession, according to the organization.
NAHB Chairman Granger MacDonald said in a statement that optimism in the market is strong, despite rising material costs and the persisting lot and labor shortage.
Two of the three HMI sub-indices inched up, with sales expectations for the next six months rising four points to 79 and current sales conditions increasing two points to 76. Buyer traffic dipped one point to 51 but remained above the breakeven mark of 50.
Optimism in the market for new single-family homes is holding strong, likely due to the shortage of existing inventory on the market and high demand for housing, NAHB Chief Economist Robert Dietz said in a statement. The growth in confidence for the month comes off of a slight dip in April after the index reached its highest mark since June 2005 in March.
While builders have been busy this spring, steady growth in material prices and the continued dispute over the price of Canadian softwood lumber imports could be a drag on that growth. Additionally, a continued shortage of skilled labor in many markets is driving labor costs higher.
Housing starts slowed in March, dropping 6.8% from February to a seasonally adjusted annual rate of 1.215 million, while single-family starts declined 6.2% month-to-month. Housing starts were up 9.2% year-over-year, with growth in building permit authorizations pointing to more construction activity likely in the coming months.