Homebuilder confidence in the U.S. has seen a significant improvement in the month of May, the National Association of Home Builders revealed in a report on Tuesday, with the index of homebuilder confidence reaching a five-year high.
The report showed that the NAHB/Wells Fargo Housing Market Index jumped to 29 in May from a downwardly revised 24 in April. Economists had expected the index to edge up to 26 from the 25 originally reported for the previous month.
With the much bigger than expected increase, the index rose to its highest level since coming in at 30 in May of 2007.
NAHB Chief Economist David Crowe said, "While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back."
"The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices," he added.
The increase by the housing market index reflected increases by each of the three components, which rebounded after showing declines in the previous month.
The NAHB said the component gauging current sales conditions and the component gauging traffic of prospective buyers each rose by five points in May to 30 and 23, respectively. With the increase, the traffic component reached its highest level since April of 2007
The component gauging sales expectations in the next six months showed a more modest increase, climbing to 34 in May from 31 in April.
The report also showed that the reading on builder sentiment in the Northeast rose to 32 in May from 26 in April. The increase lifted the index to its highest level since July of 2007.
The readings on builder sentiment in the Midwest and the South both rose by five points to 27 and 28, respectively, while the index for the West dipped to 29 in May from 31 in April.
Wednesday morning, the Commerce Department is scheduled to release its monthly report on new residential construction. Housing starts are expected to rise to an annual rate of 690,000 in April from 654,000 in March.
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