Builder Confidence Bounces Back Somewhat In April

Builder confidence is rebounding as the nation slowly begins to emerge from economic shutdowns enacted in response to the coronavirus pandemic.

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released Monday showed that builder confidence for newly built single-family homes jumped seven points to 37 in May. The HMI – which measures builder sentiment – had dropped 42 points to 30 in April, the largest single-month decline in history.

By comparison, the HMI sat at 76 at the end of 2019.

“The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey,” said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, New Jersey. “At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings.” 

Source: National Association of Home Builders/Wells Fargo

All HMI elements posted gains in May. The HMI index gauging current sales conditions increased six points to 42, the component measuring sales expectations in the next six months jumped 10 points to 46 and the measure charting traffic of prospective buyers rose eight points to 21.

Among regions, the Midwest increased seven points to 32, the South rose eight points to 42 and West posted a 12-point gain to 44. The Northeast fell two points to 17.

“Low interest rates are helping to sustain demand,” NAHB Chief Economist Robert Dietz said. “As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen. Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks. However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors.”