December Homebuilder Confidence Nosedives Again

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The National Association of Home Builders (NAHB)/Wells Fargo housing market index for December plunged by four points to 56, a second consecutive decline after five months of rising confidence. The index posted an 18-year high of 74 in December 2017. Economists polled by Bloomberg were expecting a boost to a reading of 61 this December.

Builders continue to report signs of consumer demand for new homes, but buyers are wary due to rising home costs. The NAHB noted that recent declines in mortgage loan rates should improve the market beginning early next year.

The index is based on an NAHB monthly survey of homebuilder perceptions of current single-family home sales and expectations for sale in the next six months. An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

The current sales conditions subindex for December fell by six points to 61 and the subindex that estimates prospective buyer traffic dropped by two points to 43. The subindex measuring sales expectations for the next six months sank four points from 65 to 61.

The NAHB noted:

Builder confidence dropped significantly in areas of the country with high home prices, which shows how the growing housing affordability crisis is hurting the market. This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.

In the NAHB’s regions, three-month moving average indexes fell in all four regions. The Northeast index score tumbled eight points to 50. The average index fell by two points to 55 in the Midwest and by three points in the West and South to 68 and 65, respectively.

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