Confidence among U.S. homebuilders dropped in May to the lowest level in a year, The National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 45 this month, the weakest since May 2013, from a revised 46 in April that was lower than initially reported, figures from the Washington-based group showed today. Readings less than 50 mean fewer respondents report good market conditions.
Still-tight credit conditions, limited availability of lots and falling affordability as home prices rise are probably preventing the residential real-estate market from gaining momentum as temperatures warm. Hiring gains may contribute to a pickup in housing demand and help offset some of the headwinds.
“Builder sentiment is becoming more in line with the market reality of a continuing but modest recovery,” NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington, Delaware, said in a statement. “However, builders expressed some optimism that sales will pick up in the coming months.”
The group’s gauge of prospective buyer traffic climbed to 33 in May, a four-month high, while the index of the six-month sales outlook increased to 57 from 56 in the prior month.
Builder confidence dropped in the South and in the West, where it fell to its lowest level in a year. Sentiment was unchanged in the Northeast and the Midwest.
Borrowing costs, which climbed in the second half of 2013, are stabilizing. The average 30-year, fixed-rate mortgage was at a six-month low of 4.21 percent in the week ended May 8, according to data from Freddie Mac in McLean, Virginia. The average from July through December was 4.37 percent.
While increasing prices are hurting affordability for those getting into the market, they also help homeowners feel wealthier. Real estate data provider Zillow Inc. sees those prices keeping up their climb.
“For almost all of the country, home values are increasing,” Chief Executive Officer Spencer Rascoff said on a May 7 earnings call. “The rate of growth is slowing, but it’s still a very healthy housing market.”
A report Friday confirmed housing starts climbed in April to its highest pace in five months with almost all of the gains coming from the volatile apartment sector, a sign that Americans are still struggling to buy single-family homes. The Commerce Department said Friday that builders started work on 1.07 million homes at a seasonally adjusted annual rate in April, up 13.2 per cent from March. The gains were driven by a 42.9 per cent jump in the construction of apartments and condominiums. The rate of building single-family homes rose just 0.8 per cent. The gains for apartment building point to an economy where more Americans rent instead of purchasing a home.