The monthly confidence gauge from the National Association of Home Builders rose 2 points to 70, the second-highest level since the downturn. "By applying the formula "(Good-Poor+100)/2" to the present and future sales sets and "(High/Very High-Low/Very Low + 100)/2" to the buyers traffic set, one may find three separate indices, the weighted average of which is the final HMI. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates most homebuilders view conditions as good rather than poor.
NAHB chairman Granger MacDonald noted builders optimism in the housing market is "solidifying". The index which measures sales expectations in the next six months increased four points to 79 and the index which looks at current sales conditions increased two points to 76. But even with construction running ahead of last year's pace, the supply of new and existing homes across much of the country remains tight.
Home-builder sentiment may be on the march, but single-family housing starts have not seen strong gains, and entry-level, mortgage-dependent home buyers are clearly struggling with weakening affordability. It was 68 in April, a decline from the previous month's reading of 71. Mortgage applications to purchase a newly built home fell 4.3% in April, compared with April 2016, according to the Mortgage Bankers Association. However, buyer traffic was rated relatively low at 51.
"While we expect a slight moderation in housing activity in the near term owing to higher mortgage rates, the picture for 2017-18 remains one of modest trend improvement", Barclays economist Blerina Uruci wrote in a research note.
Regionally over the month, starts were down in the Northeast (down 37 percent from March) and the South (down 9 percent), but rose in the Midwest (up 41 percent) and the West (5 percent).