After an Eight-Month Ride, Home Builder Confidence Stalls

Despite big earnings gains from the big public builders, overall confidence among the nation's home builders took a pause in January. An industry index measuring sentiment was unchanged after eight consecutive monthly gains. The index was heading toward the line between positive and negative sentiment, but appears to have stalled.

"Uncertainties stemming from last month's fiscal cliff negotiations contributed to the pause in builder confidence and continuing discussions among policymakers related to spending cuts and the future of the mortgage interest deduction could put a damper on housing demand in the coming months," noted Barry Rutenberg, chairman of the National Association of Home Builders in a release.

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The NAHB's sentiment index remains at 47; 50 is the line between positive and negative. One year ago it stood at 25. A huge drop in supplies of existing homes for sale has helped the builders considerably over the past several months. This week Miami-based Lennar reported a 32 percent year-over-year jump in new orders, although analysts had expected an even bigger gain.

The three components of the NAHB index, however, were mixed.

Builder sentiment edged up just one point in October, according to an industry association index.
Builder sentiment edged up just one point in October, according to an industry association index.

Current sales conditions remained unchanged, sales expectations over the next six months fell one point, and buyer traffic gained one point. Regionally, home builders were less confident in the Northeast and Midwest, but gained confidence in the South and particularly in the West where the index jumped 14 points, well into the positive range.

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"House price improvement has been the biggest reason we've seen more confidence improving in general, and prices are taking a stronger hold out West," said David Crowe, NAHB's chief economist, who notes that monthly regional moves can be more dramatic. A three-month running average, however, still puts the West ahead of the rest of the nation.

Builders out West have also been heartened by a huge drop in distressed properties, thanks to an influx of large-scale investors looking to reap the rewards of a growing single-family rental market. As supplies of homes for sale drop there precipitously, the builders are moving in again.

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—By CNBC's Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at

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