The National
Association of Homebuilders (NAHB) announced on Wednesday its housing market
index (HMI) fell to 45 in May from
an unrevised April reading of 51. This marked the first drop in builder confidence in six
months and was
the lowest reading since January (44).
Economists had anticipated the HMI to hold steady at 51.
A reading over
50 indicates more builders view conditions as good than poor.
All three major HMI components demonstrated declines in early May. The
component charting sales expectations in the next six months plunged 9 points
to 51, while the component tracking current sales conditions decreased 6 points
to 51, and the component measuring traffic of prospective buyers dropped 4 points
to 30.
Commenting on
the latest report, NAHB Chairman Carl Harris said that the market had slowed
down since mortgage rates increased and this had pushed many potential buyers
back to the sidelines.
Meanwhile, NAHB
Chief Economist Robert Dietz noted that a lack of progress on reducing
inflation pushed long-term interest rates higher in the first quarter and this
is acting as a drag on builder sentiment. “The last leg in the inflation fight
is to reduce shelter inflation, and this can only occur if builders are able to
construct more attainable, affordable housing,” he added.