Builder confidence improved in December to its highest reading in 18 years as builders say housing market conditions are improving due to new policies, according to the Housing Market Index by the National Association of Home Builders and Wells Fargo.
Builder confidence increased five points to 74 in December, up from a downwardly revised November reading. Before the downward revision, November showed the highest level of builder confidence in months. Now, December’s increase placed builder confidence at its highest level since July 1999.
“Housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community,” NAHB Chairman Granger MacDonald said.
Derived from a monthly survey that NAHB has been conducting for 30 years, the index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as good, fair or poor.
The survey also asks builders to rate traffic of prospective buyers as high to very high, average or low to very low. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates most homebuilders view conditions as good rather than poor.
All three HMI components increased in December. The component measuring buyer traffic surged eight points to 58, while the index that looks at current sales conditions increased four points to 81. The index which measures sales expectations over the next six months increased three points to 79.
“The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise,” NAHB Chief Economist Robert Dietz said. “With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year.”