US home builder confidence makes strong gain in December

17 December 2013 16:32  [Source: ICIS news]

WASHINGTON (ICIS)--Market confidence among US home builders made strong gains this month, according to an industry survey on Tuesday, indicating that the key housing sector could see a continuing if gradual recovery in the new year.

In its monthly survey of member contractors, the National Association of Home Builders (NAHB) said that its housing market index (HMI) rose four points this month to 58, a level 37 points higher than December 2011.

The index had been flat at 54 in October and November after edging down from the 57 recorded in September.

The HMI is a compilation of three subsidiary measures: home builders’ current sales of single-family homes, the number of prospective home buyers visiting model homes and contractors’ expectations for home sales over the next six months.

On the 1-100 HMI scale, a reading of 50 or above indicates that home builders are confident about their prospects over the next six months.

The December HMI score of 58 “is definitely an encouraging sign as we move into 2014”, said NAHB chairman Rick Judson, who noted that the index has been above 50 for seven straight months.

“This indicates that an increasing number of builders have a positive view on where the industry is going,” Judson said.

NAHB chief economist David Crowe said that “the recent spike in mortgage interest rates has not deterred consumers as rates are still near historically low levels”.  Crowe said that potential home buyers are having more problems with tight lending criteria than with the cost of borrowing.

Crowe noted that there were gains in all three of the subsidiary market measures - actual sales, consumer traffic and expected sales.

On the strength of the December gain, Crowe said that “we continue to look for a gradual improvement in the housing recovery in the year ahead”.

During the US housing boom years of 2002-2005, the HMI had held steady in the mid-60s and even topped 70 at times.

At the bottom of the US 2008-2009 recession, the HMI hit an all-time low of 8 in January 2009.

After bouncing around in the middle teens for the rest of 2009 and through most of 2010 and 2011, the HMI measure of builder confidence began a recovery in early 2012 but then seemed to peak at 47 in December-January.  The index dipped to 41 in April this year and then turned upwards again in May, making modest gains and some downturns since then.

The housing market is a key downstream consumer industry for a wide variety of chemicals, resins and derivative products involved in home construction and as components in equipment and furnishings that go into new homes.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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