Builder Confidence Closes Year on High Note

Builder confidence in the market for newly built single-family homes jumped seven points to its highest level since July 2005, the National Association of Home Builders reported yesterday.

The NAHB/Wells Fargo Housing Market Index increased to 70 in December. The component gauging current sales conditions increased seven points to 76 while the index charting sales expectations in the next six months jumped nine points to 78. Meanwhile, the component measuring buyer traffic rose six points to 53, marking the first time this gauge has topped 50 since October 2005. Any number over 50 indicates that more builders view conditions as good than poor.

All four regions posted increases as well. The Northeast rose by six points to 51, the Midwest posted a three-point gain to 61, the South rose by one point to 67 and the West posted a two-point gain to 79.

“This notable rise in builder sentiment is largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability,” said NAHB Chairman Ed Brady.”

“The large 7-point increase can largely be attributed to a post-election bump, as builders are reportedly hopeful that the new administration will reduce regulatory burdens that have been weighing on housing affordability,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Unseasonably mild weather has also likely bolstered builder sentiment during the month.”

Earlier this week, the Mortgage bankers Association reported its Builder Application Survey fell by 3 percent in November from October, but increased by 12 percent from a year ago. Following yesterday’s Federal Open Market Committee decision to raise the federal funds rate by 25 basis points, MBA revised its 2017 housing forecast.

“We have adjusted the forecasted path of interest rates upwards slightly in our December forecast, and expect that refi activity will continue to fall during 2017,” said MBA Chief Economist Mike Fratantoni. “We expect that purchase activity will be robust, backed by the strength of the job market.”