Homebuilders' confidence slipped slightly in Jan 2014 after an
unexpected jump last month.
The National Association of Home Builders (NAHB) /Wells Fargo
Housing Market Index (HMI), known as the homebuilder sentiment
index, declined a point to 56 in January from a revised reading
of 57 in Dec 2013. All the three index components - current sales
conditions, future sales expectations and buyer traffic -
declined in the month.
NAHB Chairman, however, said that many homebuilding markets
continued to improve. Notably, according to the Chairman builder
confidence "has essentially leveled out and is holding at a solid
level" primarily on the December jump in the index.
Albeit interest rates are rising, these are still below
historical levels and housing is still affordable. In addition,
accelerating job growth and increasing consumer confidence are
also boosting demand for new homes. Rising home prices,
historically low interest rates and pent up demand will continue
to drive the hosing momentum, according to NAHB Chief Economist,
Moreover, any reading on this index above 50 indicates that an
increasing number of builders view the market conditions as good
Thus, despite the one point slip, most homebuilders like
D.R. Horton, Inc.
The Ryland Group, Inc.
) rose on an overall positive outlook for the sector.
The housing momentum seen in 2012 and in the first half of
2013 slowed down in the past 3-4 months due to the recent spike
in mortgage rates, rising home prices, tight credit availability
and the political uncertainty in Washington. However, most
homebuilders believe that this is temporary and are confident of
demand picking up in the forthcoming quarters. These builders
expect buyers to adjust to rising prices and interest rates and
return to the market.
Also, Federal Reserve's promise to keep interest rates low for
some time despite tapering its $85 billion stimulus plan by $10
billion from Jan 2014 removes a major overhang for the
D R HORTON INC (DHI): Free Stock Analysis
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