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Housing Market Gets a Vote of Confidence from Builders

After reaching an 18-year high of 74 points in December, builder confidence for newly built single-family homes dropped slightly in January to 72 on the National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI). Despite this fall, builders remain confident about the year ahead as demand for housing rises along with an overall strong economy.

“Builders are confident that changes to the tax code will promote the small business sector and boost broader economic growth,” said Randy Noel, Chairman of NAHB, on the overall confidence of NAHB members in the housing market.

The monthly HMI index gauges builder perceptions of current single-family home sales and sales expectations for the next six months on a scale of good, fair, or poor. The survey also asks NAHB members to rate traffic of prospective buyers. 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 rather than poor.

The three HMI components posted minor losses in January with the index measuring buyer traffic falling four points to 54, the component charting current sales conditions dropping one point to 79, and the component gauging sales expectations for the next six months falling a point to 78.

“The HMI gauge for future sales expectations has remained in the 70s, a sign that housing demand should continue to grow in 2018. As the overall economy strengthens, owner-occupied household formation increases, and supply of existing home inventories tightens, we can expect the single-family housing market to make further gains this year,” said Robert Dietz, Chief Economist at NAHB.

Looking at the three-month moving averages for regional HMI scores, the Western region rose two points to 81, the South increased one point to 73, the Midwest rose a single point to 70, and the Northeast climbed five points to 59.

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