Builder confidence rose two points in January to a six-month high in response to increased buyer interest, but most builders don’t expect a surge in activity anytime soon, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released Wednesday.
Based on a monthly survey that measures builder perceptions and expectations for home sales, the index rose to 35 in January from a reading of 33 in December. An index rating above 50 indicates that more builders view sales conditions as good, while a rating below 50 indicates that more builders view conditions as poor.
NAHB Chief Economist David Seiders said several factors are helping to resuscitate buyer demand, including reductions in mortgage interest rates since mid-year, lower energy prices following what had been record highs, solid growth in employment and household income, reductions in home prices, and home builder sales incentives.
“Builders are starting to see that the worst is behind them and that buying conditions have improved to the point that greater optimism is warranted,” Seiders said.
Two out of three component indexes registered improvement in January, as the index gauging current single-family home sales and the index gauging traffic of prospective buyers each gained three points, to 36 and 26, respectively. The index gauging sales expectations for the next six months remained unchanged at 49.
Meanwhile, three out of four regions surveyed in the HMI posted gains in January. Two-point gains were registered in the Northeast, Midwest and South, to 39, 24 and 41, respectively. The HMI for the West remained unchanged from the previous month at 32.