The National Association of Home Builders gave the long-struggling US housing market a boost Tuesday when its index of builder confidence, a joint venture with Wells Fargo, showed sentiment among the nation's builders reached a five-year high this month. The reading exceeded even the most optimistic projection offered by economists in a recent Bloomberg survey, which averaged 26. The reading reported on Tuesday was 29 for this month, a full five points ahead of the revised reading for April.
The NAHB first began compiling its survey of builder sentiment in January 1985. The index averaged a reading of 54 in the five years leading up to the recession, and reached an all-time low of 8 in January 2009. While May's reading represent progress, economists cautioned, it is still well below a reading of 50, which indicates that more builders view conditions favorably than unfavorably. Among the more positive developments in the May reading on builder sentiment is the gauge of buyer traffic, which increased to its highest level since April 2007, at 23.
Builder confidence improved, according to Tuesday's report, in three of the four major US regions, with the West being the lone region in which confidence dropped. The biggest gain in builder sentiment came in the Northeast, where it surged from an April reading of 26 to 32 this month. The Midwest enjoyed a gain of 5 to 27, and the South also saw its builder confidence reading rise five points to 28.