Homebuilder Sentiment in U.S. Cools in January From 18-Year High

(Bloomberg) -- Sentiment among America’s homebuilders eased in January to the second-highest level since 2005, a sign the housing market will continue to make strides this year, according to data Wednesday from the National Association of Home Builders/Wells Fargo.

Highlights of Homebuilder Sentiment (January)

  • Housing Market Index fell to 72 (matching est.) from December’s 74 reading that was the strongest since 1999
  • Measure of six-month sales outlook slipped to 78 from a 12-year high of 79
  • Current sales gauge for single-family homes cooled to 79 from 80 

Key Takeaways

The first builder-sentiment reading for 2018, albeit a decline from a 18-year high, is consistent with other reports that indicate residential construction will build on recent growth, as a solid job market, relatively low mortgage costs and rising confidence help propel housing demand. 

Hurdles for builders still include climbing costs of construction supplies, as well as shortages of workers and ready-to-build land. Last month’s tax-cut legislation that limited deductions for mortgage interest and property taxes could also hurt sales in some areas, even if it gives an overall boost to the U.S. economy.

Officials’ Views

The outlook gauge suggests “housing demand should grow in 2018,” Robert Dietz, chief economist at NAHB, said in a statement. “As the overall economy strengthens, owner-occupied household formation increases and the supply of existing home inventory tightens, we can expect the single-family housing market to make further gains this year.”

“Builders are confident that changes to the tax code will promote the small business sector and broader economic growth,” NAHB Chairman Randy Noel, a custom home builder from LaPlace, Louisiana, said in a statement. “Our members are excited about the year ahead, even as they continue to face building-material price increases and shortages of labor and lots.”

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Other Details

  • Gauge of prospective buyer traffic fell to 54 from 58
  • Regional index of confidence rose in the Northeast to 62 from 53
  • Measure of sentiment among builders fell in the South to 72 from 75; also dropped in the Midwest and West
  • Readings greater than 50 indicate more respondents reported good market conditions

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