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Builder Confidence Improves Again in December

Builder confidence continued to improve in December as the Housing Market Index (HMI) rose two points to 47--its highest level since April 2006--the ""National Association of Home Builders (NAHB)"":http://www.nahb.org/ reported Tuesday. It was the eighth straight monthly increase in the index and matched economist expectations.

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November's reading was revised down to 45 from the originally reported 46.

Two of the three components of the index improved--the measures of current sales and buyer traffic--while the gauge of sales six months out slipped one point from the revised November reading of 52 (down from the original 53).

Two of the three components--current and future sales--were above 50, the midpoint between positive and negative readings. The last time the overall index was above 50 was in April 2006.

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 overall index is up 26 points in the last year, the 18th straight month of year-over-year improvement, matching the record yearly gain achieved in September and again in November. The current sales index has risen 29 points in the last year, also matching the record hit last month.

The traffic measure too registered a record year-over-year gain (18 points), while the index for the sales outlook is up 25 points year-over-year, shy of the 34-point record for annual gains.

That the overall index and two of its three components are showing record annual increases underscores the depths of the housing recession.

The HMI, considered a measure of builder confidence, could be reflected in permits and starts data reported for December. That report from the Census Bureau will be issued in January. Meanwhile, the Census will report Wednesday on permits and starts for November, when builder confidence (as reported by NAHB) reached 45 on the index.

The index improved in two of the four census regions, jumping 12 points in the Sandy-ravaged Northeast to 42 and improving two points to 53 in the Midwest. The reading in the Northeast was the highest since February 2007, and the Midwest’s was the highest since May 2005. The index slipped two points in the South to 47 and three points in the West to 45.

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. The overall index has been under 50 since April 2006--79 straight months.

_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 a.m. (EST)._

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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