New Home Builds Up, Builder Confidence Flat

The pace of both new housing starts and future building permits set four-year highs in December, the closest the industry has been to pre-recession levels since the housing meltdown. A survey of homebuilder perceptions stalled this month, however, and builders remain skeptical of future growth.

Builders started construction on new homes in December at the fastest pace since June 2008, though confidence in future growth within the industry remains elusive.

New housing starts surged 12.1 percent in December, reaching a 954,000-unit annual rate, boosted in part by 20.3 percent increase in the volatile sector of multi-family unit construction. The December increase was also inflated by a downward revision of the November estimate for housing starts, which moved to an 851,000-unit rate from the 861,000 originally reported.

Single-family home starts, the largest segment of the market and a more stable gauge of industry progress, climbed 8.1 percent last month to a 616,000-unit pace. Permits for future single- and multi-unit home construction also edged higher to a 903,000-unit rate, the quickest since July 2008.

Despite the improving levels of construction, homebuilder perceptions of the market's improvements remain mixed, at best. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) went unchanged in January, maintaining a score of 47 after eight consecutive months of gains. The score remains the highest point for the Index since April 2006.

"Conditions in the housing market look much better now than at the beginning of 2012 and an increasing number of housing markets are showing signs of recovery," said NAHB chairman Barry Rutenberg. "However, uncertainties stemming from last month's fiscal cliff negotiations contributed to the pause in builder confidence, and continuing discussions among policymakers related to spending cuts and the future of the mortgage interest deduction could put a damper on housing demand in the coming months."

A composite score below 50 indicates that more builders have a negative opinion of future market conditions than a positive one. Of the three components that measure builder sentiment for the survey, the gauge of current sales conditions remained the only positive score, unchanged at 51. Meanwhile, the component gauging sales expectations in the next six months fell one point to 49, and the component gauging traffic of prospective buyers gained one point to 37.