Home Builders Confidence Index Climbs Back to 2005 Levels

Mortgage & Real Estate

Home builders are becoming optimistic about sales and the outlook for 2014, according to a monthly survey of National Association of Home Builders members.

The December NAHB/Wells Fargo Housing Market Index rose to 58 in December, up two points from November and up 11 points year-over-year. The HMI has been above 50 for the past seven months. (A reading above 50 means more builders view conditions as good as opposed to bad.)

This is definitely an encouraging sign as we move into 2014, said NAHB chairman Rick Judson, a homebuilder from Charlotte, N.C. This indicates that an increasing number of builders have a positive view on where the industry is going.

The homebuilder confidence index was stuck at 54 in October and November, due to the federal government shutdown, according to NAHB chief economist David Crowe.

The December uptick is due in part to the release of the pent-up demand caused by the uncertainty generated by the October government shutdown, says Crowe.

The last time the home builder index hit 58 was back in August. Prior to that, it hadnt been that high since November 2005.

Meanwhile, NAHB economists are forecasting that new homes sales will total 607,000 in 2014, up 40% from this year. We are operating under an enormous amount of pent-up demand, Crowe recently told NMN, and there is a limited supply of existing homes on the market.

Separately, Wall Street analysts at Keefe, Bruyette Woods issued a new report on the 2014 outlook that calls for modest sales growth. We believe new home sales could increase by 10-15%, the KBW report says.

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