Builder confidence in the market for newly built, single-family homes fell 1 point to 56 in January from a revised December reading of 57, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
“Following an unexpected jump last month, builder confidence has essentially leveled out and is holding a solid level,” said NAHB Chairman Rick Judson, a homebuilder from Charlotte, N.C. “Many markets continue to improve and this bodes well for future home sales.”
“Rising home prices, historically low mortgage rates and significant pent-up demand will drive a continuing, gradual recovery in the year ahead,” said NAHB Chief Economist David Crowe. “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.”
Derived from a monthly survey NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of currently 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 declined in January. The index gauging current sales conditions edged one point lower to 62, while the index gauging expectations for future sales fell 2 points to 60. The index gauging traffic of prospective buyers fell 3 points to 40.
Looking at the three-month averages for regional HMI scores, the Northeast and West each rose 4 points to 42 and 63, respectively, while the South held steady at 56. The Midwest fell a single point to 58.