Builder Confidence Slides Off 12-Year High

News

The Housing Market Index (HMI) backed down a bit
from its post-election surge in January, dropping 2 points to a composite
reading of 67.  The National Association
of Homebuilders (NAHB)/Wells Fargo index, which measures builder confidence in
the new home market, had gained 7 points (now revised down to 6) in December to
reach its highest level since July 2005.

According to NAHB Chairman Granger MacDonald, “Builders
begin the year optimistic that a new Congress and administration will help
create a better business climate for small businesses, particularly as it
relates to streamlining and reforming the regulatory process.”

“NAHB expects solid 10 percent growth in
single-family construction
in 2017, adding to the gains of 2016,” said NAHB
Chief Economist Robert Dietz. “Concerns going into the year include rising
mortgage interest rates as well as a lack of lots and access to labor.”

The HMI is derived from a monthly survey NAHB
conducts among its new home builder members. 
Builders are asked to provide their perceptions of current single-family
home sales and sales expectations for the next six months as “good,”
“fair” or “poor.” They are also asked 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 had advanced sharply
last month and all three retreated in January. The component gauging current
sales conditions
fell three points to 72, the index charting sales expectations
in the next six months registered a two-point decline to 76 and the component
measuring buyer traffic edged one-point lower to 51.

Regional HMI scores are reported as three-month
moving averages.  The Northeast rose two
points to 52 and the Midwest posted a three-point gain to 64. The South and
West each held steady at 67 and 79, respectively.

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