Builder confidence falls at start of new year

Builder confidence declined slightly at the start of 2018, according to the National Association of Home Builders and Wells Fargo Housing Market Index.

Builder confidence in the market for newly-built single-family homes dropped two points to a level of 72 in January, coming down off of December’s 18-year high.

“The HMI gauge of future sales expectations has remained in the 70s, a sign that housing demand should continue to grow in 2018,” NAHB Chief Economist Robert Dietz said. “As the overall economy strengthens, owner-occupied household formation increases and the supply of existing home inventory tightens, we can expect the single-family housing market to make further gains this year.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the 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 for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates most homebuilders view conditions as good rather than poor.

All three HMI components showed minor losses in January. The index which measures current sales conditions fell one point to 79 as the components which looks at sales expectations in the next six months also fell one point to 78. The component which examines buyer traffic fell four points to 54 in January.

However, NAHB explained that builders continue to remain confident that recently passed tax reform will promote economic growth.

“Builders are confident that changes to the tax code will promote the small business sector and boost broader economic growth,” NAHB Chairman Randy Noel said. “Our members are excited about the year ahead, even as they continue to face building material price increases and shortages of labor and lots.”

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