by Calculated Risk on 12/16/2020 10:04:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 86, down from 90 in November. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Down from Record High, Still Strong

Ending a string of three successive months of record highs, builder confidence in the market for newly built single-family homes fell four points to 86 in December, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. Despite the decline, this is still the second-highest reading in the history of the series after last month’s mark of 90.

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

“Builder confidence fell back from historic levels in December, as housing remains a bright spot for a recovering economy,” said NAHB Chief Economist Robert Dietz. “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.”
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The HMI index gauging current sales conditions dropped four points to 92, the component measuring sales expectations in the next six months fell four points to 85 and the gauge charting traffic of prospective buyers also decreased four points to 73.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 82, the Midwest was up one point to 81, the South rose one point to 87 and the West increased two points to 96.

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was close to the consensus forecast.

Housing and homebuilding have been one of the best performing sectors during the pandemic.