Housing Market Index Jumps to Highest Level Since Mid-2005
The combined confidence level of single-family homebuilders shot up in December, largely because they have endeared themselves to President-elect Donald Trump's positive statements toward the housing industry.
Their collective sentiment is reflected in the National Association of Home Builders' Housing Market Index, which jumped seven points to 70 - the HMI's highest level since July 2005.
"The large seven-point increase can largely be attributed to a post-election bump, as builders are reportedly hopeful that the new administration will reduce regulatory burdens that have been weighing on housing affordability," stated Mark Vitner, a senior economist at the Wells Fargo Economics Group.
Ed Brady, chairman of the NAHB agrees with Vitner's assessment that the rise is attributable to President-elect Trump's pledge to cut regulations harming the homebuilding sector.
"This is particularly important, given that a recent NAHB study shows that regulatory costs for home building have increased 29 percent in the past five years," he said.
Each HMI is derived from a monthly survey that gauges builders' perceptions of current single-family home sales and sales expectations for the next six months. The survey also asks builders to rate traffic of prospective buyers. Scores for each component are then used to calculate a seasonally adjusted index, and any number over 50 indicates that more builders view conditions as positive than negative.
All three HMI components posted healthy gains in December. The component gauging current sales conditions increased seven points to 76. The component that measures sales expectations in the next six months jumped nine points to 78. And the metric about buyer traffic rose six points to 53, the first time this gauge has been above 50 since October 2005.
All four regions climbed higher in the latest index -- the Northeast by six points to 51, the Midwest by three points to 61, the South by one point to 67, and the West by two points to 79.