Builder Confidence Falls to 67
Builder confidence fell two points to 67 in May after falling eight points to 69 in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It was the sixth consecutive month the HMI declined after hitting an all-time high of 90 last November. Rising inflation and higher mortgage rates are leading to slowing traffic and shaking confidence. All three major indices that make up the HMI posted declines in May. The component charting traffic of prospective buyers fell five points to 48, marking the first time this gauge has fallen below the breakeven level of 50 since June 2020. The HMI index gauging current sales conditions fell one point to 77 and the gauge measuring sales expectations in the next six months fell two points to 61. Scores fell in all regions. Any number over 50 indicates that more builders view the component as good than view it as poor.
Building Permits Fall 7.0%
Overall building permits fell 7.0% to a 1.70 million unit annualized rate in May after falling in April. Single-family permits dropped 5.5% to a 1.05 million units, the lowest pace for single-family permits since July 2020. Multifamily permits decreased 9.4% to an annualized 647,000 pace. Regional permits were mixed year to date.
Housing Starts Fall 14.4%
Housing starts fell 14.4% in May to a seasonally adjusted annual rate of 1.55 million units after rising to 1.72 million units in April. Single-family starts dropped 9.2% to 1.05 million units after falling less than first reported in April. Multifamily starts fell 23.7% to 498,000 units after rising to 624,000 units in April. Starts were up in all regions. NAHB says prices for construction materials are up 19% year to date and supply chain disruptions need to be resolved so builders can increase production and contain costs. Rising costs and climbing mortgage rates continue to make housing less affordable and price more first-time buyers out of the market.
New Home Sales Rise 10.7%
New home sales rose 10.7% in May to a seasonally adjusted annual rate of 696,000 homes from an upwardly revised reading in April. Sales were down 5.9% from May 2021 and 10.6% year to date. The median new home price fell to $449,000 in May after jumping to $450,600 in April and was up 15% year over year. New single-family home inventory fell to a 7.7 months’ supply but was up 42.6% from May 2021. However, only 8.3% of those homes are completed and ready to occupy. New home sales fell in all regions. Sales of new homes are tabulated when contracts are signed and are considered a more timely barometer of the housing market than purchases of previously-owned homes, which are calculated when a contract closes.
Existing Home Sales Fall 3.4%
Existing home sales fell 3.4% in May to a seasonally adjusted annual rate of 5.41 million units after falling to 5.61 million units in April, according to the National Association of Realtors. It was the fourth consecutive month existing home sales fell. Sales were down 8.6% from May 2021. The inventory of existing homes rose to 1.16 million, a 2.6-months’ supply of homes at the current sales pace, up from 2.2 months in April. The median existing-home sales price was up 14.8% year over year to $406,000. the first time the median home price has been over $400,000. Year-over-year prices have now risen for 122 consecutive months. Properties were on the market for an average of just 16 days in May, with homes priced under $500,000 being snapped up in even less time. All-cash sales fell to about 25% of sales and the percentage of first-time buyers continued to fall as mortgage rates rise.
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