A contractor works on a new home under construction at Taylor Morrison Home Corp.’s La Solara Community in Dublin, California, U.S. (Photographer: David Paul Morris/Bloomberg)

U.S. Homebuilder Sentiment Rises for First Time Since December

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(Bloomberg) -- Sentiment among U.S. homebuilders rose for the first time in five months as job gains and tax cuts helped keep buyer demand healthy amid rising prices and mortgage rates, according to data Tuesday from the National Association of Home Builders/Wells Fargo.

Highlights of Homebuilder Sentiment (May)

  • Housing Market Index strengthened by two points to 70 (est. 69); prior month’s reading revised down to 68, lowest since Oct.
  • Current-sales measure for single-family homes rose to 76 from 74; gauge of prospective buyer traffic unchanged at 51
  • Index of six-month sales outlook unchanged at 77

Key Takeaways

Sentiment remains close to an 18-year high, with unemployment below 4 percent for the first time since 2000, and government tax cuts signed into law in December potentially helping motivate some consumers to purchase a home this year. Such factors are mitigating other forces that may restrain optimism among developers: Rising lumber prices are making building more costly, and mortgage borrowers are confronting escalating interest rates.

Economist’s View

“Tight housing inventory, employment gains and demographic tailwinds should continue to boost demand for newly-built single-family homes,” NAHB Chief Economist Robert Dietz said in a statement. “With these fundamentals in place, the housing market should improve at a steady, gradual pace in the months ahead.”

Other Details

  • Confidence gauge rose in Midwest to a three-month high; unchanged in Northeast
  • Index fell in the South to a seven-month low, slipped in West to lowest since July
  • Three-month moving average fell one point in Midwest and South, unchanged in Northeast, West

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