Homebuilder sentiment rises in May thanks to strong demand and tight housing supply

Source: CNBC

Strong demand and a slim supply of affordable, existing homes for sale has the nation’s homebuilders feeling better about their business.

A monthly index of builder sentiment rose 2 points in May, 1 point higher than analysts expected. The National Association of Home Builders sentiment index now stands at 70. Anything above 50 is considered positive. April’s reading was revised down 1 point to 68. The index stood at 69 in May 2017.

Prices for newly built homes continue to rise, as builders focus more on the move-up market as opposed to the entry level, where so much of the demand currently exists from millennial homebuyers. Builders point to higher costs for land, labor and materials, as making it too difficult to profit on low-priced homes.

Of the NAHB index’s three components, current sales conditions increased 2 points to 76 in May. Buyer traffic and sales expectations in the next six months remained unchanged at 51 and 77, respectively.