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Builder Confidence Steady; Confirms Modest Growth Forecast for 2016

construction-twoHome builder confidence in January 2016 changed very little from December's level, but this only means that economists were spot on with their predictions for the new year.

Last month, builder confidence in the market for newly constructed single-family homes decreased to 61 but was later revised to 60. This month, builders' confidence rests at 60 as well, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

“After eight months hovering in the low 60s, builder sentiment is reflecting that many markets continue to show a gradual improvement, which should bode well for future home sales in the year ahead,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Missouri.

Jan-HMIThe 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.” Any number over 50 indicates that more builders view conditions as good than poor.

In January, only one HMI component experienced an increase, while the other two components decreased month-over-month, the NAHB reported.

The component measuring current sales conditions rose two points to 67 in January. The component gauging sales expectations in the next six months fell three points to 63, while the buyer traffic index dropped two points to 44.

According to the data, regionally, in terms of three-month moving averages for regional HMI, all four regions decreased slightly. The Northeast, Midwest and West all fell one point to 49, 57, and 75, respectively. The South declined two points to 61.

“January’s HMI reading is right in line with our forecast of modest growth for housing,” said NAHB Chief Economist David Crowe. “The economic outlook remains promising, as consumers regain confidence and home values increase, which will help the housing market move forward."

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