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NAHB: Builder Confidence Drops Slightly in December

by Peter Thomas Ricci

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Builder confidence in the market for newly constructed single-family homes remained relatively flat in December, dropping one point to 61 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

David Crowe, the NAHB’s chief economist, said past HMI performance bodes well for 2016.

“For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” Crowe said. “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”

Builder Confidence in December

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components posted modest losses in December. The index measuring sales expectations in the next six months fell two points to 67, the component gauging current sales conditions decreased one point to 66, and the index charting buyer traffic dropped two points to 46.

Looking at the three-month moving averages for regional HMI scores, the West increased three points to 76 while the Northeast rose a single point to 50. Meanwhile the Midwest dropped two points to 58 and the South fell one point to 64.

Tom Woods, the NAHB’s chairman, said that concerns remain in the homebuilding sector.

“Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labor,” Woods said.

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