As the economy shows significant signs of strengthening, home builders’ confidence reached an 18-year high in December. The brighter building forecast was unexpected news at a time when major changes are on the way for American businesses.
“Demand for housing is increasing at a consistent pace, driven by job and economic growth, rising home ownership rates and limited housing inventory,” said National Association of Home Builders’ Chief Economist, Robert Dietz. “With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017.”
An 18-Year High Encourages Home Builders
In the most recent survey, builder confidence in the market for newly built single-family homes jumped five points to 74. This was the highest projection since July 1999. In November, builder confidence reached an eight-month high.
The NAHB/Wells Fargo Housing Market Index is viewed as the pulse of the single-family housing market. The index’s three components—buyer traffic, current sales conditions and sales expectations—all rose several percentage points in December.
The Housing Market Index, which has been conducted for 30 years, gauges builder perceptions of current single-family home sales and sales expectations for the next six months. Any number above 50 indicates that more builders view conditions positively than those who view it poorly.
Tax Changes may Support Industry Growth
Although many home builders opposed the Republican tax overhaul, its benefits may outweigh the drawbacks. The plan’s business incentives may provide more growth in spite of changes to both the mortgage interest and property tax deductions.
“Housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community,” said National Association of Home Builders’ Chairman, Granger MacDonald.
National Building Forecast Improves
Looking at the three-month moving averages for regional Housing Market Index scores, the Midwest climbed six points to 69, the South rose three points to 72, the West increased two points to 79 and Northeast inched up a single point to 54.
The December spike in the Housing Market Index restores confidence in the home building industry at a traditionally slow time of year. If this trend continues, 2018 may be the best year yet for building homes in America.