Homebuilder confidence drops for first time since April

Index tracking sentiment is still up year-over-year


Homebuilders are reining in their expectations for the housing market, according to a new report.

The National Association of Home Builders/Wells Fargo Housing Market Index for this month dropped to 86, seasonally adjusted, after reporting its highest reading in history in November. It marks the first time since April that the index’s reading has seen a month-over-month decline.

December’s reading is still a record, however. It marks the second-highest reading in the index’s 35-year history.

The index tracks homebuilder confidence in current and future single-family home sales and traffic of potential homebuyers on a monthly basis. A reading of more than 50 indicates a positive outlook; a reading under 50 indicates a negative outlook.

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Mirroring the overall index’s step back, homebuilder sentiment was also lower when it came to single-family sales, with a reading of 92. The outlook for home sales in six months time dropped to 85, the same reading reported in September, while the outlook for buyer traffic fell to 73, just below September and October’s reading of 74.

Regional sentiment once again followed in national’s footsteps, with regional index readings all below those recorded in November.

But despite December’s lower figures, all components and regions tracked by the indices were up significantly year-over-year.

The housing market has had a record run this year, but with a rise in Covid-19 infection rates and homebuyer demand wavering as access to credit tightens, some economists question how much longer the gains can be sustained.