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Builder Confidence Strong and Steady in May

Builder confidence in the new-homes marketplace held firm at a healthy level in May, according to NAHB’s Housing Market Index (HMI). The monthly gauge of builder sentiment remained unchanged from an April reading of 69.

“Demand remains strong and as mortgage interest rates begin to edge up, buyers continue to move into the marketplace at a healthy clip,” said NAHB President Bobby Rayburn. “Robust job growth, solid home-price appreciation and favorable interest rates that remain low and attractive by historical standards point to an upbeat outlook for housing.”

The HMI is derived from a monthly survey of builders that NAHB has been conducting for the last 19 years. Home builders are asked to rate current and expected sales of single-family homes and traffic of prospective buyers. Any number over 50 indicates that more builders view sales conditions as good than poor.

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The indicator measuring buyer traffic jumped seven points to a 13-month high of 55 in May, offsetting slight declines in the two other components of the HMI index. Current sales of new single-family homes fell three points to 74 and sales expectations for the next six months declined one point to 75.

“When the index of prospective buyers jumps above 50, it usually indicates a solid housing market and shows that more families are looking for new homes,” said NAHB Chief Economist David Seiders. “With job growth and household income accelerating, this will provide a stronger foundation for economic activity during the second half of this year and in 2005. And that’s good news for housing, despite moderate increases in mortgage rates from recent lows.”
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