U.S. builder confidence falls slightly in January, homes sales likely to improve gradually in 2017

U.S. builder confidence for newly-built single-family homes continued to stay firm in January. The NAHB Housing Market Index dropped 2 points to 67 in January from a downwardly revised December reading of 69. Sentiment dropped throughout components, which imply a rebalancing after the post-election surge. All three index components dropped on the month.

Present sales conditions fell 3 points to 72. In spite of the monthly fall, builder confidence continues to be at a strong level, just 2 points below its cycle high. The reading is in line with modest bolstering in homebuilding.

Homebuilder sentiment dropped in Northeast, West and the South, whereas confidence remained the same in the Midwest. The West recorded the biggest decline, falling 11 points. The major fall in the West might be due to weather, given the recent rains and snow. Even though challenges for the housing market stay in the place, continued gradual improvement is expected in home sales and in single family construction in the year ahead, noted Wells Fargo in a research report.

“NAHB expects solid 10 percent growth in single-family construction in 2017, adding to the gains of 2016. Concerns going into the year include rising mortgage interest rates as well as a lack of lots and access to labor”, said NAHB Chief Economist Robert Dietz.