Homebuilder Confidence Weakens on Soft Sales; Outlook Improves

An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

The current sales conditions subindex dropped two points in May to 59, and the sales expectations subindex rose a point to 64. The subindex that estimates prospective buyer traffic also fell one point, to 39.

NAHB’s chief economist said:

Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home. On the bright side, the [index] 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.

In the NAHB’s four regions, the three-month moving average index rose in the South from 56 in April to 57 in May and by a like amount to 55 in the Midwest. In the Northeast, the index slipped by a point to 41 and the index dropped three points in the West to 55.

The most prevalent interest rate for a conventional 30-year fixed mortgage loans last week was 4% for high-quality borrowers. Mortgage Daily News reports that several lenders cut their rate for the best qualified borrowers to 3.875%. The 52-week range for conventional 30-year fixed loans is 3.55% to 4.26%.

The NAHB/Wells Fargo housing market index has remained in positive territory since last July, but after a sharp drop in the first half of 2014 has barely managed to return to its level of early last year. Still, prior to mid-2013 the index had not risen to 50 since mid-2006.

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