NAHB Housing Market Index: "Builder Confidence Posts Solid Gain After Historic Drop"

The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.

The latest reading of 37 is up 7 from last month's 30 after its largest monthly decline last month.

Here are some excerpts of yesterday morning's monthly update:

In a signal that the housing market is showing signs of stabilizing and gradually moving forward in the wake of the COVID-19 pandemic, builder confidence in the market for newly-built single-family homes increased seven points to 37 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The rise in builder sentiment follows the largest single monthly decline in the history of the index in April.

The designation of home construction as an essential business during the crisis helped keep most residential construction workers on the job, which is reflected in the May HMI. At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings. Jurisdictions are also adapting to the new environment with third-party and virtual inspection rules.

All the HMI indices posted gains in May. The HMI index gauging current sales conditions increased six points to 42, the component measuring sales expectations in the next six months jumped 10 points to 46 and the measure charting traffic of prospective buyers rose eight points to 21.

Here is the historical series, which dates from 1985.

The HMI correlates fairly closely with broad measures of consumer confidence. Here is a pair of overlays with the Michigan Consumer Sentiment Index (through the previous month) and the Conference Board's Consumer Confidence Index (also through the previous month).