Home builders were no more or less confident in the market for new homes in December, the National Association of Home Builders reported Wednesday.
The NAHB/Wells Fargo Housing Market Index (HMI) remained at 16, flat with November and in line with analyst expectations. Two of three the components of the HMI remained flat as well, with the index gauging current sales conditions remaining at 16 and that measuring sales expectations in the next six months holding at 25. The component index gauging traffic of prospective buyers fell a point to 11.
Regionally, the index shed four points in the Midwest and West, to 13 and 11, respectively, and one point in the South, to 17. The Northeast, which suffers from a small survey sample and is thus not particularly reliable, gained 12 points to 24.
"The good news is that the index and its subcomponents remain above recent lows from the early fall," said David Crowe, the builders' group chief economist. "NAHB expects an improving job market this spring will help prospective buyers feel more confident and propel more sales activity in 2011. However, the continued problems that builders are facing in obtaining construction credit and accurate appraisal values could significantly slow the onset of a housing recovery."
NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich., said, "While the HMI is adjusted for seasonal factors, the typical cold-weather slowdown in sales activity is being accentuated by ongoing weakness in the job market, the rising number of foreclosures and short-sales, and very challenging credit conditions for both builders and buyers."
The HMI measures builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor," with any number over 50 indicating that more builders view conditions as good than poor.
Analysts saw positives in the data. Michael Rehaut, home building analyst at J.P. Morgan, wrote in a note to investors,"We view these data points as consistent with recent builder commentary as well as our conversations with industry participants, pointing to a stable to slightly improving housing market following the drop after the expiration of the tax credit, as the August and September surveys were at 13. Separately, but more importantly, in our view, we remain comfortable with housing supply, as we note that existing homes for sale are currently 16% below their peak, while moreover, note that the more moderate pace of liquidation of foreclosures and shadow inventory continues to be firmly in place, which we believe will persist over the next 12-24 months."
In his research note, Carl Reichardt at Wells Fargo Securities said, "The HMI showed meaningful improvement in the Northeast, but as the smallest new home market, with minimal large public builder presence in that market and a relatively small sample size, we do not believe the region has seen the dramatic month-to-month improvement in trends indicated. Having said that, we continue to believe that the Northeast is regionally the strongest new home sales market in the nation."