Homebuilder confidence edged higher in May after a steep drop the prior month, though the market for new single-family homes remains under pressure from rising mortgage rates and the economic fallout from the war in Iran.
Climbing three points from April’s seven-month low of 34, the National Association of Home Builders/Wells Fargo Housing Market Index reached 37 in May
That marks a full 25 months running that the gauge has failed to reach the 50-point threshold separating optimism from pessimism, according to Reuters. Any reading below 50 signals that more builders view conditions as poor than good. “The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand,” NAHB Chairman Bill Owens said in a statement. “However, efforts in the House to modify the 21st Century ROAD to Housing Act could increase the nation’s housing supply and help ease builder concerns.” All three parts of the index rose by three points in May. Current sales conditions reached 40, prospective buyer traffic increased to 25, and the outlook for sales over the next six months was 45.
The modest improvement came in above expectations. Economists had forecast the index to remain flat at 34, according to CNBC. NAHB Chief Economist Robert Dietz pointed to climbing long-term interest rates as a continuing drag on demand. “Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges,” Dietz said in a statement.