Builders' confidence in the market for new single-family homes surged as the National Association of Home Builders' housing market index rose to 70 in December from an unrevised 63 in November.
Thomson Reuters' poll of economists predicted the index would be 63.
"This notable rise in builder sentiment is largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability," NAHB Chairman Ed Brady said. "This is particularly important, given that a recent NAHB study shows that regulatory costs for home building have increased 29 percent in the past five years."
"Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing," according to NAHB Chief Economist Robert Dietz. "The rise in the HMI is consistent with recent gains for the stock market and consumer confidence. At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor."
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "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 that more builders view sales conditions as good than poor.
The current single-family home sales index jumped to 76 from 69, the sales expectations index for the next six months soared to 78 from 69; and the traffic of prospective buyers index increased to 53 from 47.
