Builder confidence rises amid low interest rates: NAHB index

The National Association of Home Builders' market index rose for second month following 3-year low in December

Builder confidence climbed for the second straight month, according to data from the National Association of Home Builders (NAHB) and Wells Fargo. Builder confidence is at 62 on a 0-100 scale, up four points from last month but down 10 points from this time last year.

The Housing Market Index (HMI) is a weighted average of separate indices for three single-family data points. It asks respondents to rate the market conditions for the sale of new homes at present and in the next six months, as well as the traffic of prospective buyers of new homes. It falls in a range of 0-100.

“Ongoing reduction in mortgage rates in recent weeks coupled with continued strength in the job market are helping to fuel builder sentiment,” NAHB Chairman Randy Noel said in a statement. “In the aftermath of the fall slowdown, many builders are reporting positive expectations for the spring selling season.”

The index that measures current conditions climbed to 67, the index measuring expectations rose five points to 68 and the index that measures buyer traffic increased four points. The overall index reached a three-year low in December 2018.

“Builder confidence levels moved up in tandem with growing consumer confidence and falling interest rates,” Robert Dietz, NAHB’s chief economist said. “The five-point jump on the six-month sales expectation for the HMI is due to mortgage interest rates dropping from about 5 percent in November to 4.4 percent this week.”

Affordability remains a critical issue, however, according to Dietz.

“Rising costs stemming from excessive regulations, a dearth of buildable lots, a persistent labor shortage and tariffs on lumber and other key building materials continue to make it increasingly difficult to produce housing at affordable price points,” Dietz added.

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