Homebuilder sentiment rises thanks to strong demand and slim supply

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.

“Tight housing inventory, employment gains and demographic tailwinds should continue to boost demand for newly built single-family homes,” said Robert Dietz, chief economist of the NAHB. “With these fundamentals in place, the housing market should improve at a steady, gradual pace in the months ahead.”

On a three-month moving average for regional scores, the West and Northeast held unchanged at 76 and 55, respectively. The South and Midwest each fell 1 point to 72 and 65.

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