REAL ESTATE NEWS...Builders lose confidence in current home sales

Builders lost some confidence this month in current sales of single-family homes, signaling wariness over whether families are ready to take the plunge into the new-home-buying pool, a report released Monday showed.

An overall gauge of confidence among home builders declined two points to 54 in May, missing Wall Street’s forecast, according to National Association of Home Builders/Wells Fargo. Meanwhile, a barometer of builders’ views on present sales of single-family homes fell two points to 59 in May.

“Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” said David Crowe, NAHB’s chief economist.

But there’s still hope for home sales, he added: “Mortgage rates remain low, and house prices are affordable. These factors should spur the release of pent-up demand moving forward.”

Along those lines, NAHB’s barometer of builders’ views on upcoming sales rose one point to 64 in May. However, a gauge of prospective-buyer traffic ticked down one point to 39.

Economists polled by Dow Jones Newswires had expected a May result of 58 for the overall index. Although May missed that consensus, builders remained upbeat. Readings above 50 signal that builders, generally, are optimistic about sales trends. May markd the 11th consecutive month of above-50 readings.

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Analysts are conflicted about the fate of builders. One brokerage recently downgraded shares of seven home builders, reasoning that they typically lag the broader market during the summer. Meanwhile, analysts at Morgan Stanley recently reported that builders may be in a relatively good position this year, thanks to a strengthening economy.

Home builders do have reasons to be hopeful about 2015 sales. Young families and other first-time buyers are tip-toeing into the market, a trend that will support the broader economy and other homeowners who want to buy a new place. Further, applications for mortgages to buy a home recently hit the fastest pace in almost two years.

On Tuesday the government will report its latest reading on new home construction, and economists polled by MarketWatch expect that the annual starts rate rose to 1.03 million in April, which would be the strongest result in three months, from 926,000 in March.

Shares of an exchange-traded fund of builders, iShares U.S. Home Construction ETFITB, +0.45% have increased about 15% over the past year and held near the flat line on Monday.