Builder Confidence Rises for First Time in Four Months

Builder Confidence

Builder confidence in the market for newly built single-family homes inched up by three points to 37 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo (NYSE:WFC) Housing Market Index (HMI). This uptick ends a four-month decline for the HMI.

“With mortgage rates down roughly 50 basis points over the past month, builders are reporting an uptick in traffic as some prospective buyers who previously felt priced out of the market are taking a second look,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Alabama. “With the nation facing a considerable housing shortage, boosting new home production is the best way to ease the affordability crisis, expand housing inventory and lower inflation.”

The HMI index gauging traffic of prospective buyers in December rose three points 24, the component measuring sales expectations in the next six months increased six points to 45 and the component charting current sales condition held steady at 40.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 51, the Midwest fell one point to 34, the South dropped three points to 39 and the West posted a four-point decline to 31.

“The housing market appears to have passed peak mortgage rates for this cycle, and this should help to spur home buyer demand in the coming months, with the HMI component measuring future sales expectations up six points in December,” said NAHB Chief Economist Robert Dietz. “Our statistical analysis indicates that temporary and outsized differences between builder sentiment and starts occur after short-term interest rates rise dramatically, increasing the cost of land development and builder loans used by private builders. In turn, higher financing costs for home builders and land developers add another headwind for housing supply in a market low on resale inventory.”

ENB
Sandstone Group