Home builders are a reliable barometer of housing market health, since their business depends on being able to anticipate buyers’ needs. That’s why the National Association of Home Builders’ monthly Housing Market Index – which measures builder confidence – is a closely watched industry metric. The index is scored on a scale where any number above 50 indicates more builders view conditions as good than poor. In May, the index fell for the fifth straight month, dropping to 69. Though still a positive result, it’s an indication that builders are starting to feel the effects of numerous challenges facing the market, including higher mortgage rates. “The housing market is facing growing challenges,” Robert Dietz, NAHB’s chief economist, said. “Building material costs are up 19 percent from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50 percent of new and existing home sales are affordable for a typical family.” But while the market has become more challenging, all three index components remain in positive territory, including the gauge of current sales conditions which scored a 78 in May. (source)
