Interest Rate Roundup

Monday, May 17, 2010

May NAHB index pops to 33-month high

The National Association of Home Builders index popped nicely in May. It rose to 22 from 19 in April, the highest since August 2007. All three subindices rose -- present sales to 23 from 20, expectations about future sales to 28 from 25, and prospective buyer traffic to 16 from 13. Regionally speaking, the Northeast index soared to 35 from 21 while the West index surged to 20 from 13. The Midwest index rose to 17 from 15 while the South index inched up to 22 from 21.

If tax credits are the only reason why housing is doing better, then why were home builders so optimistic about business in May? That's a riddle the naysayers are going to have to answer. My take? Housing is cheap again, with both pricing and interest rates at rock-bottom levels. So even with the credit in the rear view mirror, real, underlying demand remains for housing.

We're not going back to boom-time sales rates any time soon. But I expect we'll continue to see gradual improvement in sales and a gradual stabilization in pricing as the supply of homes for sale continues to shrink. Or in plain English, the anemic recovery remains on track.


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