The January NAHB/Wells Fargo Housing Market Index dropped one point from a one-point downwardly revised December level to 56. This is the eighth consecutive month above 50, the point where more builders rate the market good rather than poor. The December index, originally reported at 58, matched the recent high in August before the mortgage rate spike and the federal government shutdown softened buyer and builder confidence. The January level demonstrates builders’ general positive attitude toward the current and future market but with some continued attention to the headwinds affecting the industry.

Builders continue their frustration over low appraisals that do not reflect the added value of more energy efficient equipment, higher costs for land, labor and building materials and the differential between high maintenance existing homes and low maintenance new homes. Low appraisals kill sales since very few buyer are able to make higher down payments to cover the equity required by lenders using inaccurate appraisals.

The three components of the index fell as well: the current sales index fell one point to 62, the expected sales index fell two points to 60 and the traffic index fell three points to 40. By region, the three-month moving average in the Northeast and West increased four points, fell one point in the Midwest and remained level in the South. The severe cold and icy weather in the South in December may have led to a seven point drop in the month-to-month trend.

In separate comments, builders did foresee a promising spring buying season as more of their customers have demonstrated greater commitment recently and the builders expect more lookers to become buyers.

Tags: economics, hmi, home building, housing