December saw homebuilder confidence hold firm from last month’s reading, as detailed by the National Association of Home Builders (NAHB)/Wells Fargo Housing Index (HMI), even as a key measure of future expectations reached new heights.
The index, which is graded on a 0 to 100 spectrum, with anything higher than 50 indicating a majority of homebuilders are confident, had a reading of 46 for December, which was unchanged from its November reading.
The major components of the index more or less stayed locked in. Current sales conditions remained the same as last month, at 48, while builders’ sales expectations for the next six months rose to 66—a three-point increase from November—and the highest level since April 2022. On the other hand, prospective buyer traffic declined one point to 31 from November’s readout.
This locked-in reading can likely be attributed to the fact that high home prices and high mortgage rates were offset in part by the anticipation of a more favorable regulatory environment in 2025, as detailed by NAHB Chairman Carl Harris.
“While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” said Harris in a statement. “This is reflected in the fact that future sales expectations have increased to a nearly three-year high.”
NAHB Chief Economist Robert Dietz was temperate in his 2025 forecast, with a reminder that inflationary pressures will continue to play a significant role in the economic landscape when it comes to homebuilding.
“NAHB is forecasting additional interest rate cuts from the Federal Reserve in 2025, but with inflation pressures still present, we have reduced that forecast from 100 basis points to 75 basis points for the federal funds rate,” said Dietz. “Concerns over inflation risks in 2025 will keep long-term interest rates, like mortgage rates, near current levels, with mortgage rates remaining above 6%.”
CoreLogic Chief Economist Selma Hepp made note of cautious optimism for the new year, though she also cited several other potential political pitfalls in her forecast.
“Homebuilders continue to gain cautious optimism that 2025 will be a better year for housing, although a lot remains uncertain on what the new administration will do,” said Hepp in statement. “And while higher construction costs are a worry due to potential deportations and tariffs, deregulation and lower corporate taxes could also offset some of the concerns. The anticipated Fed rate cut later this week will continue to bolster homebuilder confidence going into the New Year as the cost of construction lending ticks downward.”
In December, 31% of homebuilders elected to reduce their listing price by about 5%, on average, of the original listing price. This reduction of prices has remained largely unchanged since July, oscillating between 31% and 33%, and was exactly the same reading from last month. The utilization of sales incentives to make listings more attractive remained at 60% in December, the same reading as November.
Regional breakdown
The Northeast remains the region with the highest HMI readout at 57. This was a two-point increase from November’s reading, which matched the month-to-month increases in both the South and Midwest.
The Midwest reading came in at 46, up from 44, while the South increased from 42 to 44. Only the Western region of the United States saw a decline in its reading, ticking down from 41 to 40 month-over-month.
For more information on the HMI, click here.
