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Builder Confidence Flat in January

Builder confidence stalled in January as the Housing Market Index (HMI) stood at 47, remaining at its highest level since April 2006, the ""National Association of Home Builders (NAHB)"":http://www.nahb.org/news_details.aspx?newsID=15709 reported Wednesday. Economists had expected the index to tick up to 48.


""December's reading"":http://www.themreport.com/articles/builder-confidence-up-again-in-december-2012-12-18 was unchanged at 47, but one of the index components--the outlook for sales six month in the future--notched down to 50 from the originally reported 51.

The outlook dropped again in January (this time to 49), but the measure of buyer traffic edged up to 37--its highest reading since April 2006--from December's 36.

The gauge of current sales was unchanged in January at 51.

With the January report, the index remained below 50--the tipping point between a positive and negative market assessment--for the 81st straight month. The last time the HMI was above 50 was April 2006, when the reading was 51 and falling. The index peaked at 78 in December 1998.

The boost in current sales should be reflected in the government's new homes sales report (to be issued next week), though the improvement in the current sales index last month matched with a slight decline in new home sales. That said, the current sales index is at its highest level since April 2006.

The HMI’s flat reading in January ended a streak of eight consecutive monthly increases. Although the index is reported as ""January,"" it would reflect builder attitudes since the middle of December, when Congress and the [COLUMN_BREAK]

White House were mired in ""fiscal cliff"" negotiations that could have involved tax changes affecting home purchases and home ownership, increasing uncertainty about housing and the economy as a whole.

""Conditions in the housing market look much better now than at the beginning of 2012 and an increasing number of housing markets are showing signs of recovery, which should bode well for future home sales later this year,"" said Barry Rutenberg, NAHB chairman.

Rutenberg said the fiscal cliff talks and concerns about ""the future of the mortgage interest deduction"" which he said ""could put a damper on housing demand in the coming months.""

Even with the flat month, the overall index is up 22 points in the last year, the 19th straight month of year-over-year improvement. The current sales index has risen 26 points in the last year, the sales forecast measure is up 20 points in the last year, and the traffic index is up 19 points in the last 12 months.

The HMI, considered a measure of builder confidence, could be reflected in permits and starts data reported for January. That report from the Census Bureau will be issued in February. Meanwhile, Census will report Thursday on permits and starts for December, when builder confidence rose two points to 47.

The index improved in two of the four census regions, jumping 14 points in the West to 59--the highest reading in the region since June 2006--and increasing three points to 50 in the South, the highest reading there since July 2006. The index fell six points to 46 in the Midwest and five points to 36 in the Northeast.

The index, built based on surveys conducted jointly by the NAHB and Wells Fargo, 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 from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:40 a.m. and again at 9:40 Eastern time._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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