The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) settled back a bit after its 5-point surge in December took it to its highest level since 1999. The Index, a measure of builder confidence in the market for newly constructed homes, dipped 1 point in January to 75, still remaining above that earlier high.

NAHB said, "With the Federal Reserve on pause and attractive mortgage rates, the steady rise in single-family construction that began last spring will continue into 2020. However, builders continue to grapple with a shortage of lots and labor while buyers are frustrated by a lack of inventory, particularly among starter homes."

The HMI is derived from a monthly survey that NAHB has been conducting for more than 30 years. The association's new home builder members are asked to report their perceptions of current single-family home sales and their expectations for sales over the next six months, categorizing them as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index charting traffic of prospective buyers increased one point to 58, the highest level since December 2017. The gauge measuring current sales conditions fell three points to 81 and the component measuring sales expectations in the next six months held steady at 79.

Regional responses are charted as three-month moving averages. The score in the Northeast rose one point to 62, the Midwest increased three points to 66 and the West moved one point higher to 84. The South was unchanged at 76.