Builders Display Optimism in NAHB/Wells Fargo Index

(Illustration courtesy of NAHB)

Homebuilder sentiment held steady to end the year, but builders expressed increased optimism for higher sales in the next months, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

Builder confidence in the market for newly built single-family homes held steady at 46 in December, the report said. Meanwhile, expectations for future sales reached a nearly three-year high.

CoreLogic Chief Economist Selma Hepp noted much remains uncertain depending on what the upcoming Trump administration will do. “And while higher construction costs are a worry due to potential deportations and tariffs, deregulation and lower corporate taxes could also offset some of the concerns,” she said. “The anticipated Fed rate cut later this week will continue to bolster homebuilder confidence going into the New Year as the cost of construction lending ticks downward.”

The latest HMI survey also revealed that 31% of builders cut home prices in December, unchanged from November. Meanwhile, the average price reduction was 5% in December, the same rate as in November. The use of sales incentives equaled 60% in December, also unchanged from November.

The NAHB/Wells Fargo HMI 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.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions held steady at 48 while the gauge charting traffic of prospective buyers posted a one-point decline to 31. The component measuring sales expectations in the next six months rose three points to 66, the highest level since April 2022.