Economy

Homebuilder confidence jumps to highest level in 20 years

Key Points
  • Builder confidence in the newly built, single-family home market jumped 5 points in December to 76, the highest reading since June 1999.
  • Current sales conditions rose 7 points to 84, sales expectations in the next six months rose 1 point to 79 and buyer traffic increased 4 points to 58.
  • Regionally, on a three-month moving average, builder sentiment in the Northeast fell 2 points to 61, increased 5 points in the Midwest to 63, moved 1 point higher in the South to 76 and increased 3 points in the West to 84.
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Homebuilder sentiment reaches highest level in 20 years

A stronger economy and a severe housing shortage have the nation's homebuilders feeling better than they have in two decades.

Builder confidence in the newly built, single-family home market jumped 5 points in December to 76, the highest reading since June 1999, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Anything above 50 is considered positive.

November's reading was also revised higher by 1 point. The index stood at 56 last December. At the worst of the housing crash, in 2009, builder sentiment hit a low of just 8.

"Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market," said NAHB Chairman Greg Ugalde, a homebuilder and developer from Torrington, Conn.

Builders' confidence is clearly based on what they're seeing in their showrooms. Of the index's three components, current sales conditions rose 7 points to 84, sales expectations in the next six months rose 1 point to 79 and buyer traffic increased 4 points to 58.

All, however, is not perfect in the homebuilding market. Builders could likely be doing even better if they didn't face so many headwinds.

"While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability," said NAHB chief economist Robert Dietz. "Higher development costs are hurting affordability and dampening more robust construction growth."

Regionally, on a three-month moving average, builder sentiment in the Northeast fell 2 points to 61, increased 5 points in the Midwest to 63, gained a point in the South to 76 and increased 3 points in the West to 84.

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