Builder confidence as measured by the National Association of Home Builders (NAHB)/Wells Fargo Home Market Index (HMI) fell back slightly in December after a four point uptick in November, and is ending the year just about where it began.  The HMI which is designed to indicate the home builder perceptions of the market for new single-family homes, was at 57 this month, down from 58 in November and one point higher than in January 2014.  The index has fluctuated from a low of 45 in May to 59 in September.

NAHB Chairman Kevin Kelly said, "Members in many markets across the country have, seen their businesses improve over the course of the year, and we expect builders to remain confident in 2015."

NAHB constructs its index each month from a survey of its homebuilder members in which it asks three questions to gauge their perceptions and expectations about the market.  Builders are asked if they consider the current sales market "good," "fair" or "poor" and to similarly grade what they expect the market to be over the next six months.  They are also asked to rate traffic of prospective buyers as "high to very high," "average" or "low to very low."  The answers are seasonally adjusted into component indices and a composite where any score over 50 indicates that more builders view conditions as good than poor.

The indices measuring both current and future sales conditions were each down one point from November to 61 and 65 respectively.  While the future sales index has remained solidly above 60 since July the current sales measure has had a wild 15 point ride over the year, changing directions five times, dropping 11 points in one month early in the year, and ending the year one point below where it began.  The index gauging prospective buyer traffic was unchanged at 45, the 110^th consecutive month it has failed to cross the milestone score of 50. 

"After a sluggish start to 2014, the HMI has stabilized in the mid-to-high 50s index level trend for the past six months, which is consistent with our assessment that we are in a slow march back to normal," said NAHB Chief Economist David Crowe. "As we head into 2015, the housing market should continue to recover at a steady, gradual pace."

Looking at the three-month moving averages for regional HMI scores, the West rose by four points to 62 and the Northeast edged up one point to 45, while the Midwest registered a three-point loss to 54 and the South dropped two points to 60.