Industry Update – December

Industry Update – December

Posted 12/28/2016

Builder confidence for newly built single-family homes reached a milestone this month, jumping seven points to a level of 70 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). That measurement is 20 points above the index’s 50-point benchmark that indicates whether builders view market conditions as good (above 50) or poor (below 50).

According to the survey, which gauges builder perceptions of current single-family home sales and expectations for the next six months, builder sentiment hasn’t been this high since July of 2005. NAHB Chairman Ed Brady attributes the increase, in part, to builders’ hopes that the country’s new administration will follow through with its pledge to cut heavy regulations that are hampering housing affordability. For this reason, NAHB Chief Economist Robert Dietz points out that the significant increase could be considered an outlier. However, he maintains that the economic fundamentals in today’s market continue to look good for housing, stating that the HMI is consistent with recent gains in the stock market and consumer confidence.

It’s also important to note that builders are coming off an exceptional year in sales. In fact, experts are calling 2016 the best year in a decade for housing. Home sales through November were at their highest level since 2007 and construction (as measured by housing starts) was at its fastest pace since 2008. As we move into the new year, momentum may slow a bit, but experts believe both population and income growth should support housing demand beyond 2017 and into 2018.