Homebuilder sentiment cools in January from 18-year high

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.

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

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.

Homebuilder sentiment cools
A carpenter works on the roof while building new homes at the Toll Brothers Inc. Baker Ranch community development in Lake Forest, California, U.S., on Tuesday, Feb. 11, 2014. Photographer: Patrick T. Fallon

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.

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 homebuilder from LaPlace, La., 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."

The gauge of prospective buyer traffic fell to 54 from 58. The regional index of confidence rose in the Northeast to 62 from 53. The measure of sentiment among builders fell in the South to 72 from 75, and also dropped in the Midwest and West. Readings greater than 50 indicate more respondents reported good market conditions.

Bloomberg News
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