Builders Confidence Grows

The December NAHB/Wells Fargo Housing Market Index rose four points to 58 as builders recovered from hesitancies in October and November. The increase puts the index back up to the peak it reached in August before the rise in mortgage rates and the uncertainty caused by the debt and deficit debate cooled confidence. This December index is 37 points above the December 2011 level.

All three of the components also showed significant increases with current sales rising 6 points to 64, the highest since December 2005. Expected sales increased 2 points to 62 and traffic increased 3 points to 44.

The three-month moving averages for the four Census regions were down in three regions as the left over effect of the declines in October and November overwhelmed the most recent increases. The Northeast, Midwest and West each fell 1 point to 38, 59 and 59 respectively while the South increased 1 point to 57.

Builders expressed confidence in buyers returning to the market as competition from foreclosures and distressed sales continued to slacken. Several builders commented on an increase demand as they announced price increases and buyers decided to buy now to preempt any further increases. While mortgage rates have risen slightly since late October, the builders are more concerned with buyer access to credit than the cost of credit.

The return in builder confidence aligns with the Census and HUD reports on October new home sales and the September and October housing permit reports. New home sales were up 25% in October over an unusually low September and back to levels established in early 2013. October housing permits were over one million for only the second time since 2008 with single-family permits back to early 2013 levels and multifamily the highest since August 2005. NAHB expects housing production to continue to improve as buyer confidence returns and the economic adds jobs.

December HMI.docx



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