Home Builder Confidence is Rising

New ConstructionHome Builder confidence is rising with news form the National Association of Homebuilders/Wells Fargo Home builders Market Index with a reading of 58 for December. This surpassed both expectations of 56 and last month’s reading of 54. Any reading above 50 indicates that more builders are confident about overall housing market conditions than not.

Analysts noted that builder confidence has steadied after the government shutdown. December’s reading was the highest in four months. Dave Crowe, NAHB chief economist, said that his organization was expecting a “gradual improvement in the housing recovery” in 2014.

Home Builder Confidence – Highest Reading Since 2005

Pent-up demand for housing is driving housing markets in spite of higher mortgage rates. Three components of builder confidence used to calculate the overall reading also rose in December. Builder confidence in current home sales rose to 64 from a reading of 58 in November; this is the highest reading since 2005.

Confidence levels in housing markets over the next six months rose to 62 from last month’s reading of 60. Builder confidence also grew in the area of buyer foot traffic in new developments and gained three points to a reading of 44.

All of this is good news, but the NAHB said that a gap remains between higher home builder confidence and the rate of new home construction. A seasonal lull in home construction is not unusual especially in areas experiencing harsh weather.

Data on November Housing Starts and Building Permits will also offer clues as to how housing markets and the general economy are doing.