Builder confidence drops, but 2016 outlook still strong

Confidence in the newly constructed single-family homes market dipped slightly in December, but builders are still optimistic going into 2016.

The Wells Fargo Housing Market Index (HMI)—a monthly survey by the National Association of Home Builders (NAHB)—is reporting that builder confidence remains relatively flat, dropping one point for December to 61 points.

“Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labour,” said Tom Woods, a home builder and NAHB chairman.

The survey gauges builder perceptions of current single-family home sales, sales expectations as well as prospective buyer traffic for the next six months.

With a scoring system for all three components, any total over 50 indicates a positive outlook from builders—with most seeing conditions as good.

All three components saw slight losses for December—sales expectations fell two points to 67, sales conditions fell one point to 66 and buyer traffic dropped two points to 46. Regionally, West and Northeast regions saw moderate increases, while the Midwest and South both fell.

“For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said David Crowe, chief economist at the NAHB. “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”

The NAHB has been conducting the monthly survey for the 30 years.