Builder Confidence Dips

According to the latest data released by the National Association of Home Builders (NAHB), confidence of home builders relative to the market for newly built, single-family homes dipped slightly in January.

The NAHB’s Housing Market Index (HMI) slipped by one point to 56, this down from 57 in the previous month of December.

Data for the HMI is derived from a monthly survey that gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”  As part of the survey builders are also asked to rate foot traffic of prospective buyers as being “high to very high,” “average” or “low to very low.”  In order to calculate the seasonally adjusted index the scores are tabulated where any number over 50 indicates that more builders view conditions as good rather than poor.

In January all three HMI components declined from the previous month. “The index gauging current sales conditions edged one point lower to 62, while the index gauging expectations for future sales fell two points to 60. The index gauging traffic of prospective buyers fell three points to 40.”

The regional HMI scores, based on a three-month moving average, shows that the Northeast and West each rose four points to 42 and 63, respectively, while the South held steady at 56. The Midwest fell a single point to 58.

NAHB Chairman Rick Judson stated, “Following an unexpected jump last month, builder confidence has essentially leveled out and is holding at a solid level.  Many markets continue to improve and this bodes well for future home sales.”

Additionally, NAHB Chief Economist David Crowe said, “Rising home prices, historically low mortgage rates and significant pent-up demand will drive a continuing, gradual recovery in the year ahead.  However, the pace of the recovery could be stronger were it not for rising construction costs and inaccurate appraisals that are keeping some home sales from going through.”