Homebuilder sentiment advances after worst slump ever

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Homebuilder sentiment rose in May by more than forecast following a record slump a month earlier as a pickup in sales and demand expectations pointed to stabilization in the real estate market.

The National Association of Home Builders/Wells Fargo Housing Market Index increased by 7 points to 37, according to data Monday. In April, the gauge plummeted 42 points, the most in records to 1985.

The median projection in a Bloomberg survey of economists called for 35 in May. Readings above 50 indicate more builders view conditions as good than poor.

"Low interest rates are helping to sustain demand," Robert Dietz, NAHB chief economist, said in a statement. "As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen."

The average rate on a 30-year fixed mortgage rate dropped in April to the lowest in Freddie Mac records back to 1971, enticing buyers. At the same time, the industry will be challenged by the surge in layoffs that has occurred over the last two months as the coronavirus prompted state and local governments to close most nonessential businesses.

All three components of the builder sentiment index — current sales, expectations and potential buyer traffic — advanced this month. Confidence improved in all U.S. regions but the Northeast.

Bloomberg News