The National Association of Home Builders' (NAHB') monthly assessment of builder confidence in the new home market showed a slight weakening in January.  The Association's Housing Market Index (HMI) which it sponsors in conjunction with Wells Fargo Bank, was at 57, down one point from December.  NAHB pointed out it was the third straight month the Index has "hovered" in the upper 50's ranger. 

"After seven months above the key 50 benchmark, builder sentiment is reflecting the gradual improvement that is occurring in many markets throughout the nation," said NAHB Chairman Kevin Kelly.

"January's HMI reading is in line with our forecast as we head into the new year," said NAHB Chief Economist David Crowe. "Steady economic growth, rising consumer confidence and a growing labor market will help the housing market continue to move forward in 2015."

The index is based on responses to a monthly survey which NAHB has conducted for 30 years.  New home builders are asked to describe both current single-family home sales and their expectation for sales over the next six month as "good," "fair" or "poor" and to gauge current traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from 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.

Builder expectations for future sales typically receive the highest score of the three components but this month slipped four points to 60.  The index measuring perceptions of the current market remained unchanged at 62 and the component measuring buyer traffic fell from 46 in December to 44. 

Looking at the three-month moving averages for regional HMI scores, the West rose by four points to 66, the Midwest registered a three-point gain to 57 and the Northeast was up two points to 47. The South dropped two points to 58.

NAHB earlier released its Remodeling Market Index (RMI) based on a similar survey conducted quarterly among its members specializing in home remodeling regarding their perceptions of both current and future market conditions.  The current market index increased from 57 in the third quarter to 60 in the fourth.  In assessing current market conditions buildings are asked to consider work in four areas, large additions, small remodels, maintenance, and repair.  All four subcomponents increased compared to the third quarter.

The RMI's future market conditions index rose to 60 from 58 in the previous quarter. All four of its subcomponents-calls for bids, amount of work committed for the next three months, backlog of jobs and appointments for proposals-increased from the previous quarter's reading.

"Even with some weakness in existing homes sales and house prices earlier in the year, remodelers are upbeat as 2014 closes," Crowe said. "The consistent improvement in RMI results throughout 2014 are a sign of the gradual recovery of the remodeling market."