Home Builders Optimism Solid And Steady

Optimism among home builders is solid and steady, at 58 for the May housing market index. This is the fourth straight 58 for this index where anything over 50 is positive. And sales are the most positive component in this report, at 65 for 6-month sales and 63 for present sales. The drag on the index comes from traffic, unchanged at 44 and continuing to reflect unusual lack of interest from first-time buyers.

The West has the highest composite score at 67, befitting the region's importance for new construction. The South, which is the largest market, is next at 60 with the Midwest right behind at 59. The Northeast, where dense development limits the new home market, trails in the far distance at 36.

The availability of jobs together with low mortgage rates are solid pluses for the new housing outlook. But strength in the housing sector has been less than overwhelming this year and lack of acceleration in this report is part of the story.

Recent History Of This Indicator:
The housing market index has been holding solidly above breakeven 50 but has been not accelerating. Though buyer traffic remains very weak, holding well below 50 and reflecting lack of participation from first-time buyers, home builders nevertheless report very strong buying interest with both current sales and future sales holding above 60. A tick higher for the composite index, which is expected at 59, would boost confidence in the new home sector and underscore the strength of construction spending which has been a leading driver for the economy.