Builder Confidence Ends Year Strong on Solid Economic Fundamentals

Builder confidence in the market for newly built single-family homes increased five points in December off an upwardly revised November reading, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since June of 1999.

“Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market,” says NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

All three HMI components registered gains in December. The HMI index gauging current sales conditions rose seven points, the component measuring sales expectations in the next six months edged up one point and the measure charting traffic of prospective buyers increased four points.

“While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability,” says NAHB Chief Economist Robert Dietz. “Higher development costs are hurting affordability and dampening more robust construction growth.”

Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points, the Midwest increased five points, the South moved one point higher and the West rose three points.