Builder confidence in the new home market, while on the surface unchanged
from December, has now dropped 5 points since establishing a decade-long high
in October. The National Association of
Home Builders (NAHB) said on Tuesday that its Housing Market Index (HMI),
jointly produced with Wells Fargo Bank, remained at 60 this month. However that stabilized number occurred only because
the December index, originally at 61, was simultaneously downgraded by one
The HMI is derived from a monthly survey NAHB conducts among its new home
builder members. They are asked to gauge
the current market for new homes as "good," "fair" or
"poor" and to do the same regarding their expectations over the next
six months. They are also asked to rate
traffic of prospective buyers as "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 conditions as good than poor.
Results for the three HMI components were mixed. The component gauging current sales conditions
rose two points to 67 while the forward looking index fell three points to 63,
and the component charting buyer traffic dropped two points to 44.
"January's HMI reading is right in line with our forecast of modest growth for
housing," said NAHB Chief Economist David Crowe. "The economic outlook remains
promising, as consumers regain confidence and home values increase, which will
help the housing market move forward."
All four regional HMI three-month moving averages registered slight
declines. The Northeast, Midwest and West each eased back one point to 49, 57
and 75, respectively, while the South fell two points to 61.
NAHB also issued its Remodeling Market Index (RMI) for the fourth quarter of
2015. This reading is taken among remodeling
specialist members and looks at perceptions of the current market and the
outlook for future work. It is divided
into four categories within the two timeframes, major additions and
alterations, smaller remodeling projects, and home maintenance and repair.
The composite RMI posted a one point gain to 58 in the fourth quarter. This, NAHB said, was consistent with results
over the last year and a half, "indicating sustained confidence in the market
Major additions and alterations, the slowest-recovering component, rose to
54 from 52 in the previous quarter. The smaller remodeling projects decreased
one point to 56 and the home maintenance and repair component of the RMI
remained at 58.
"Remodelers' outlook on the market
has been positive for the past three years," said NAHB Remodelers Chair Robert
Criner. "Most importantly, the
confidence has been continuous over this period. Professional remodelers have
been hard at work rebuilding the sales pipeline during the past several years,
and the RMI results are the proof that it's paid off."
Compared to third quarter results the RMI was up two points to 66 in the
Northeast, unchanged at 58 in the Midwest, up one point to 57 in the South and
up two points to 63 in the West.
The future market conditions index gained a point from the previous quarter.
Among its four components, calls for bids and backlog of jobs each rose one
point from the previous quarter-to 58 and 61, respectively. Meanwhile,
the amount of work committed and appointments for proposals each rose two
points from the previous quarter's readings-to 57 and 60, respectively.
The current market conditions index was unchanged from the previous quarter at
56 with its major additions and alterations component up 2 points to 54, smaller
remodeling projects down one to 56 and the home maintenance and repair
component unchanged at 58.
Crowe said "The steady, performance of the RMI over the past six quarters is
consistent with our projection for continued modest growth in remodeling
spending. Constraints to faster growth
include labor shortages and home owners who are having trouble obtaining loans
for larger projects."