Home Builder Sentiment Improves Despite Ongoing Affordability Challenges

Home builder confidence improved slightly in May. According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), confidence in the market for new single-family homes increased by three points to 37 in May. Still, rising mortgage rates and economic uncertainty continue to challenge the housing industry.

Builders in some regions have even more positive outlooks

Most regional HMI scores increased in May. Looking at the three-month moving averages for regional HMI scores, only the West recorded a one-point drop to 28. Meanwhile, the Midwest registered a one-point gain to 43, the Northeast increased one point to 42, and the South remained steady at 35.

Builders are doing what they can to combat affordability challenges

Home builders are continuing to offer incentives to boost sales. According to the latest HMI survey, 61% of builders reported using sales incentives, up from 60% in April. Additionally, 32% of builders cut prices in May, down from 36% in April. The average price reduction was 6%, up from 5% the prior month.