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Builder Confidence Swells on Positive Outlook for 2018

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built single-family homes rose five points to 74 in December, after a downwardly revised November reading. This was the highest reported rating since July 1999, over 18 years ago, according to the December HMI data released by the National Association of Home Builders (NAHB) on Monday.

The HMI is derived from a monthly survey that NAHB has been conducting for 30 years, and which 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.” A score of over 50 on this index indicates that more builders view conditions as good than poor.

An improved regulatory environment for firms in the residential construction sector was one of the key factors boosting builder confidence according to NAHB. “Housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community,” Granger MacDonald, NAHB’s chairman, said.

Demand for housing is on the rise on the back of low employment rates, favorable demographics, and a tight supply of existing home inventory. All these factors point towards an upward trend for the single-family housing sector in 2018. “The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise,” Robert Dietz, NAHB’s Chief Economist, said.

All three HMI components registered gains in December, with the component measuring buyer traffic jumping eight points to 58, the index gauging current sales conditions rising four points to 81, and the index charting sales expectations in the next six months increasing three points to 79.

Looking at the three-month moving averages for regional HMI scores, the Midwest climbed six points to 69, the South rose three points to 72, the West increased two points to 79, and Northeast inched up a single point to 54.

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at [email protected].

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