The Housing Market Index for May was released this week, posting a 3-point increase in builder confidence over April. Furthermore, the component of the Housing Market Index, which gauges builder’s expectations for future sales, was 53, the highest number since February 2007. The Housing Market Index ranks builder outlook using a three-part system. Builders are asked to describe their current buyer traffic as well as their current sales and expectations for the next six months. 
May’s report also showed a 4-point increase in the current sales department for a score of 48. Driving builder outlook is the surge of buyer demand. Diminishing inventories of resale homes across the country continues to be a problem for many future homeowners. Buyers often find themselves competing in bidding wars to secure the home of their dreams while interest rates remain at record lows. In light of such fierce competition and low interest rates, home buyers are increasingly turning to new construction. As evidenced in the May Housing Market Index, builders are indeed seeing more and more consumers come through their doors driving the builder traffic score, which increased 3 points to 33.
National Association of Home Builders Chairman Rick Judson, a North Carolina builder, stated: “Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates, and strengthening local economies. This is definitely an encouraging sign.” Judson echoed previous Housing Market Index reports, repeating that the main challenges for builders are availability of lots for building, labor shortages, and high costs of building materials. NAHB Chief Economist David Crowe acknowledged those concerns, remarking that it will take time to reestablish chains of supply on those areas and despite those factors builders and consumers alike remain confident.
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