Homebuilder sentiment rises to seven-month high in May

Sentiment among homebuilders increased in May by more than expected, sustaining this year's upward swing on stronger sales and lower mortgage rates.

The National Association of Home Builders/Wells Fargo Housing Market Index rose to 66, the highest level since October as all three main measures increased, according to a report Wednesday. Readings above 50 indicate more builders view conditions as good than poor.

Luke Sharrett/Photographer: Luke Sharrett/Bloo

Homebuilders are increasingly upbeat after a weak year for the sector. The sentiment gauge fell to a three-year low in December but has moved steadily higher since then, amid a decline in mortgage rates. At the same time, other recent data have suggested the housing market is yet to fully stabilize.

Existing-home sales, which make up about 90% of the market, fell in March for the fourth time in five months, while new-home construction decelerated to the slowest pace since May 2017. Sales picked up in the Northeast, South and West, and were unchanged in the Midwest. A gauge of present sales rose to 72 in May from 69 the previous month while future sales picked up to 72 from 71 and buyer traffic came in at 49, up from 47.

"Builders are busy catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply," NAHB Chairman Greg Ugalde, a homebuilder and developer in Connecticut, said in a statement. "However, affordability challenges persist and remain a big impediment to stronger sales."

The Washington-based trade association represents more than 140,000 members in areas ranging from building and remodeling to housing finance. Economists in a Bloomberg survey had projected the main housing sentiment index would rise to 64 from 63.