H Housing

NAHB Housing Market Index Stabilized Despite Rising Costs

17 May, 2021
Existing Home Sales

NAHB Housing Market Index remained unchanged in May despite rising costs. The gauge of hombuilder sentiment held at 83 and matched the consensus forecast of the Bloomberg survey.

NAHB Chairman Chuck Fowke said “Builder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates, and a growing demographic of prospective home buyers”. Looking at the details, a measure of current sales conditions was unchanged (at 88), while the component measuring traffic of prospective buyers fell slightly (from 74 to 73).

My guess is that the trend could weaken a bit in the coming months in a context where:

1- Homebuilders will increase prices due to rising land, material and regulatory costs. In addition, it seems that labor availability could be a challenge in many markets and would result in wage pressures.

2- Mortgage rates are unlikely to decline significantly in a context where Treasury yields have recently rebounded.

3- Several reports suggest that “existing home inventory might have bottomed in March“.