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Home Builder Confidence Down for Now but Upbeat for 2016

construction-twoConfidence among home builders dipped down slightly in December, but builders remain optimistic about the housing market.

For the second consecutive month, builder confidence in the market for newly constructed single-family homes decreased, this time one point to 61 in December, the National Association of Home Builders (NAHB) reported in their Wells Fargo Housing Market Index (HMI).

“For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said David Crowe, NAHB Chief Economist. “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”

regionsCrowe also noted that single-family home builders are being hindered by low existing-home inventory on the market.

"Fewer existing home sellers result in fewer potential home buyers and most new home buyers come from selling their former home," he explained. "Supply headwinds have slowed delivery times as builders compete for workers. Hiring in the home building industry has increased faster than other industries in the past several months although tightness continues."

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

In December, all three HMI components endured small decrease, the NAHB reported.

The component measuring sales expectations in the next six months fell two points to 67, the component gauging current sales conditions fell one point to 66, and the buyer traffic index dropped two points to 46.

Regionally, in terms of three-month moving averages for regional HMI, the West had a score of 76, up three points in December, while the Northeast increased one point to 50. Meanwhile the Midwest decreased two points to 58 and the South fell one point to 64.

“Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labor,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Missouri.

Click here to read the full report.

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