Results of December's Housing Market Index (HMI) survey conducted by the National Association of Home Builders/Wells Fargo show a dip in builder confidence in December, with the overall HMI score dropping one point, to 61. December's decrease is nothing to sound alarms about, as builders still view conditions as "good" (indicated by a score over 50), despite ongoing challenges presented by the price of land and labor in multiple markets across the country.
All three components of the monthly survey posted "modest losses" month-over-month, but positive growth is evident year-over-year for current sales and future sales expectations, jumping four points and three points, respectively. Prospective buyer traffic stayed flat year-over-year with a score of 46, and down two points from Novembers score of 48.
Season slowdown continues to impact the reading for present sales conditions of single-family detached homes. Builders have marked current sales conditions down following October's robust score of 70, moving the score for December (66) another notch down the scale from November's score of 67. Despite the dip in November and December, builder confidence in current single-family home sales and future sales expectations are in the "good" range, and year-over-year growth is promising sign for continued recovery in the new year.
Regional HMI scores indicate that builders in the West are currently working in the best conditions, while builders in the Northeast region have posted the lowest HMI scores for over a year, and December's score of 49 once again puts them below the "good" threshold. Present conditions for selling homes in the West remained on a stable or positive trajectory for 10 consecutive months up until December's one point decline to 76. Conditions in the Midwest and South regions continue to dip in the winter months, but both remain in the "good" range.
Builders report that traffic of prospective buyers decreased month-over-month, sliding two points down the scale to a 46, following November's score of 48. December's dip breaks a five month streak of positive or stable growth in traffic from potential new home buyers, but the decrease is in line with patterns seen in historical data. December's score is in the "low to very low" spectrum of NAHB's scale (below 50), but this month's score is still on the cusp of "average," and a fairly good score for the winter months.
Historical data for all three components of the survey show that builder confidence has surpassed levels seen before the recession, and the "U" shape of historical data indicates how much housing has bounced back since December 2009, when builders rated current sales conditions at an 8, future sales expectations at a 17, and traffic from prospective buyers at a 7.
“For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said NAHB Chief Economist David Crowe. “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.”
Read more about today's release from the NAHB >>