Builder Confidence Slips but Remains High in January

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index SLIPPED one point in January to a still lofty 75 (out of 100);
  • Current sales component of the HMI FELL three points to 81;
  • The outlook for future sales (six months out) in the near term was UNCHANGED at 79
  • The measure of buyer traffic ROSE one point to 58
  • Regionally, the index IMPROVED in all four census regions, reaching a three-year high of 86 in the West.

Trends:

  • The total HMI had not fallen month-month since it dipped two points in June to 64;
  • The month-month drop in the total index was only the second in the last 13 months;
  • The three-point slide in current sales was the largest since that measure fell six points in December 2018.

Data Source: National Association of Home Builders (NAHB)

Image result for builder confidence

The National Association of Home Builders’ Housing Market Index teetered back ever-so-slightly to realty as the builder confidence index slipped one point in January to a still high 75.

The index has been above the “break-even” point of 50 for 80 straight months, almost as long as it was mired below 50 – 85 months – in the aftermath of the Great Recession.

During the 80 months, residential construction employment has jumped 36 percent, from 2.15 million to 2.92 million. In the same period – since March 2013 – new home sales have risen 60 percent from a seasonally adjusted annual rate of 449,000 to 719.000 and the median price of a new home is up 32.1 percent, from $250,500 to $330,800.

During that period too the now home market has shifted from single- to multi-family as indicated by government reports on new housing permits and starts.

In March 2013, 65 percent of new building permits were for single-family homes while most recently that share dropped to 61.9 percent. The homeownership rate has fallen too, though not as sharply – from 65 percent to 64.1 percent.

Builder confidence rose to its highest level in 20 years in early December (based on sentiment at the end of November) as the outlook for current sales, for sales six months forward and buyer traffic all rose.

The increase in confidence has come despite relatively weak new home sales. In the ten years since the end of the Great Recession, new home sales have averaged about 483,000 per month. In the same time span before the Recession began, new home sales averaged 992,000 per month.

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