U.S. builder confidence decreases more than forecast in December

The National Association of Homebuilders (NAHB) announced on Wednesday its housing market index (HMI) fell 4 points to 86 in December from November’s all time high of 90.

Economists had forecast the HMI to decline to 88.

A reading over 50 indicates more builders view conditions as good than poor.

All three HMI components recorded declines this month. The indicator gauging current sales conditions fell 4 points to 92 in December, while the component measuring traffic of prospective buyers also decreased 4 points to 73 and the measure charting sales expectations dropped 4 points to 85.

NAHB Chairman Chuck Fowke noted: “Housing demand is strong entering 2021, however the coming year will see housing affordability challenges as inventory remains low and construction costs are rising. Policymakers should take note to avoid increasing regulatory costs associated with land development and residential construction”.

Meanwhile, NAHB Chief Economist Robert Dietz said: “Builder confidence fell back from historic levels in December, as housing remains a bright spot for a recovering economy. The issues that have limited housing supply in recent years, including land and material availability and a persistent skilled labor shortage, will continue to place upward pressure on construction costs. As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes”.