Builder Confidence in U.S. Remains Flat in December

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According to the National Association of Home Builders - Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built, single-family homes remained unchanged in December from the previous month at 16.

"Builders are bracing themselves for a slow holiday season as a number of factors continue to cause uncertainty among consumers and builders alike," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "While the HMI is adjusted for seasonal factors, the typical cold-weather slowdown in sales activity is being accentuated by ongoing weakness in the job market, the rising number of foreclosures and short-sales, and very challenging credit conditions for both builders and buyers."

"The steady but low level of the HMI reflects the fact that builders and consumers have yet to see consistent signs that the economy is improving," noted NAHB Chief Economist David Crowe. "The good news is that the index and its subcomponents remain above recent lows from the early fall. NAHB expects an improving job market this spring will help prospective buyers feel more confident and propel more sales activity in 2011. However, the continued problems that builders are facing in obtaining construction credit and accurate appraisal values could significantly slow the onset of a housing recovery."

Derived from a monthly survey that NAHB has been conducting for more than 20 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 from 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.

Two out of three components of December's HMI remained unchanged from the previous month, including the component gauging current sales conditions (which remained at 16) and the component gauging sales expectations in the next six months (which was flat at 25). The component gauging traffic of prospective buyers fell a single point, to 11.

Regionally, HMI scores declined four points in the Midwest and West, to 13 and 11, respectively, and one point in the South, to 17. The Northeast, which can display greater month-to-month volatility due to its smaller survey sample, posted a 12-point gain to 24 in December.

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