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Builder confidence in the market for newly-built single-family homes wrapped up 2016 on a high note.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), the level of confidence shot up seven points to a level of 70 in December -- the highest reading since July 2005.

“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. “This is particularly important, given that a recent NAHB study shows that regulatory costs for home building have increased 29% in the past five years.”

Healthy increases

The 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.

All three HMI components posted solid gains 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. The component measuring buyer traffic rose six points to 53 -- the first time this gauge has topped 50 since October 2005.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose six points to 51, the Midwest posted a three-point gain to 61, the South was up a point to 67, and the West posted a two-point gain to 79.

“Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing,” said NAHB Chief Economist Robert Dietz. “The rise in the HMI is consistent with recent gains for the stock market and consumer confidence. At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor.”

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Jobless claims

First-time applications for state unemployment benefits were down again last week.

The Department of Labor (DOL) reports initial jobless claims totaled a seasonally adjusted 254,000 in the week ending December 10, down 4,000 from the previous week and the 93rd consecutive week of initial claims below 300,000 -- the longest streak since 1970.

The four-week moving average, which is considered a more accurate gauge of the labor market, rose 5,250 from the previous week to 257,750.

The complete report is available on the DOL website.


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