Lending

Builder Confidence Holds Steady in January

But stalemate in Washington continues to impede the housing recovery.

January 23, 2013
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Builder confidence in the market for newly built, single-family homes was unchanged in January, remaining at a level of 47 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.

This means that following eight consecutive monthly gains, the index continues to hold at its highest level since April of 2006.

Conditions in the housing market look much better now than at the beginning of 2012, and an increasing number of housing markets are showing signs of recovery, says NAHB Chairman Barry Rutenberg.

“That should bode well for future home sales later this year,” he says. “However, uncertainties stemming from last month’s fiscal cliff negotiations contributed to the pause in builder confidence, and continuing discussions among policymakers related to spending cuts and the future of the mortgage interest deduction could put a damper on housing demand in the coming months.”

“Builders’ sentiment remains very close to the index’s tipping point of 50, where an equal number of builders view conditions as good and poor, and fundamentals indicate continued momentum in housing this year,” says NAHB Chief Economist David Crowe. “However, persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals, and the ongoing stalemate in Washington over critical economic concerns continue to impede the housing recovery.”

Derived from a monthly survey NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores from 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.

The index’s components were mixed in January. The component gauging current sales conditions remained unchanged at 51. Meanwhile, the component gauging sales expectations in the next six months fell one point to 49, and the component gauging traffic of prospective buyers gained one point to 37.

The HMI three-month moving average was up across all regions, with the Northeast and Midwest posting two-point gains to 36 and 50, respectively. The South registered a three-point gain to 49, and the West posted a four-point increase to 51.

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