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).

Home builder confidence as measured by the NAHB/Wells Fargo Housing Market Index (#HMI) was unchanged in May at an elevated level of 83. A favorable business environment (interest rates and demand) is offsetting soaring material prices, but for how long? https://t.co/DD69TAu8fm

— NAHB (@NAHBhome) May 17, 2021

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“.

Existing Home Inventory Might Have Bottomed https://t.co/TTqXClbGT3 pic.twitter.com/2wV8nm7zU1

— Bill McBride (@calculatedrisk) May 13, 2021