Is the rate that houses are being built slowing down
Banks could be harmed if housing starts continue to slow REUTERS

Homebuilder confidence in the U.S. single-family home market rose to a five-year high in May as buyer traffic increased and sales improved, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday.

The index rose to 29 from a downwardly revised 24 in April, the highest level since May 2007. It surpassed a forecast of 26 by Dow Jones. Any reading above 50 indicates that a majority of homebuilders are confident, so the survey remains below historically healthy levels.

Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April, said Barry Rutenberg, chairman of the NAHB, in a statement. It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.

The survey's three components of builders' perceptions of current sales, sales expectations and prospective buyer traffic all rose following declines in the previous month. Current sales rose five points to 30, sales expectations rose three points to 34 and traffic increased five points to 23. Three of four U.S. regions had improved setiments, with the west reporting a two point decline to 29.

While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back, said David Crowe, NAHB chief economist.