Builder Sentiment Tumbles 8 Points Lower in May, Marking Fifth Consecutive Month of Declines

On Tuesday (5-17-22), The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that builder sentiment in the market for newly built single-family homes tumbled -8 points lower in May to a reading of 69. This marks the fifth consecutive month that builder sentiment has declined, and the HMI is now at its lowest level since June 2020.

According to the NAHB, any reading above 50 indicates that more builders view conditions as good rather than poor and that demand remains strong.

All three HMI indices posted major losses in May. The HMI index gauging current sales conditions fell -8 points to a reading of 78. The gauge measuring sales expectations in the next six months dropped -10 points to a reading of 63, and the component charting traffic of prospective buyers posted a -9-point decline to a reading of 52.

Looking at the three-month moving averages for regional HMI scores, the Northeast held steady at 72 while the Midwest dropped -7 points to a reading of 62; the South fell -2 points to a reading of 80; and the West posted -6-point decline to a reading of 83.

In remarks prepared to accompany the release of May’s HMI, Robert Dietz, NAHB’s Chief Economist, said, “The housing market is facing growing challenges. Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.”