Homebuilder Sentiment Unexpectedly Falls In December

Date: December 24, 2015

Index Sees Third Consecutive Month Of Waning Optimism

The National Association of Home Builders reported that its NAHB/Wells Fargo index of homebuilder sentiment fell from 62 in November to 61 in December. The index indicates more respondents have positive views about the housing market than negative views when it is over 50. Economists, however, had expected the index to come in at 63, according to Bloomberg News. Housing market momentum has “cooled after strong gains earlier in the year as limited wage growth has bridled how fast the industry can improve.” Similarly, CNBC reported builders are “still citing the high costs of buildable lots and labor as challenges to a stronger recovery.” The AP reported that the index shows “homebuilders are feeling slightly less confident about their sales prospects in coming months, though they remain positive overall that the housing market will continue to improve next year.” While a retreat “from last month’s reading, the latest builder index is in line with a gradual, consistent housing recovery, said David Crowe, the NAHB’s chief economist.”

What This Means For Small Businesses

Homebuilder sentiment has been mixed for the past few months. Although it rose to the highest level in a decade in September, it has declined since October. Still, sentiment about the future of the US housing market remains positive, which could in turn lead to general improvement in the US economy, particularly as other sectors continue to be weak drivers of growth. As NFIB Chief Economist William Dunkelberg pointed out in the latest Small Business Economic Trends report, “With weak expectations for sales and business conditions, prospects for strong inventory investment are poor.” He also cautioned that “Overall, the outlook remains about the same, slow 2 percent-ish growth, payroll employment growth averaging around 200,000 a month, 100,000 in the Household Survey (enough to keep the unemployment rate around 5 percent), not much pressure on prices from Main Street.”

Additional Reading

The Wall Street Journal also covered the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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