U.S. NAHB housing market index sees marked decline in December, housing construction to ease further

The U.S. NAHB housing market index saw a marked fall in December, implying that housing construction is expected to ease further in the months ahead. The composite indicator came in at 56 in the month, slightly below consensus expectations of 60. The December reading was 4 points below the November reading and 12 points below the reading in October.

Falls were widespread through components, which have descended to ranges that had prevailed from mid-2013 to mid-2015. The homebuilders’ assessments of present sales fell 6 points to 61, while assessments of expected future sales dropped 4 points to 61. In the meantime, the index of buyer traffic dropped 2 points to 43, its lowest reading since mid-2015.

Homebuilder confidence has fallen markedly in all regions in recent months. In December, Northeast saw the biggest decline, where the index dropped 15 points to 37. The NAHB press released showed that these widespread falls were mainly due to worries about housing affordability, which has been deteriorating in the face of a stable rise in house prices and mortgage rates that now stand a fair bit above where they had stood a few years ago, noted Barclays in a research report.

However, affordability is still comparatively attractive in comparison to historical norms, builder confidence remains in positive territory, and homebuilders continue to report consumer demand for new houses.

“Taken together, we continue to interpret the incoming data from the housing market as being consistent with a levelling of housing activity following a subdued expansion, with little sign of a substantial inventory overhang that might signal a sharp contraction”, added Barclays.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 38.5571. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex