Builder confidence drops again, Home Builders Association says

National index falls to lowest level since May 2015

Builder confidence in the market for newly built single-family homes fell again in December, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index.

The drop of four points brings the index to 56, the lowest it has been since May 2015. The index remains in positive territory, however.

According to Robert Dietz, NAHB’s chief economist, the biggest drops in builder confidence were reported in areas where home prices are particularly high – a factor that “shows how the growing housing affordability crisis is hurting the market.”

Dietz added, “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.”

Using a three-month average, the biggest drop was seen in the Northeast, where it fell by eight points to 50. In addition, the Midwest dropped two points to 55 and the West and South fell three points to 68 and 65, respectively.

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders 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.