US housebuilder sentiment improves in January

Sentiment among US housebuilders unexpectedly improved in January, according to data released on Wednesday.

The National Association of Home Builders/Wells Fargo housing market index rose two points from December to 58, beating expectations for an unchanged reading as the gradual decline in mortgage rates in recent weeks helped to sustain sentiment.

The component measuring current sales conditions ticked up two points to 63, while the gauge of expectations for the next six months pushed up three points to 64 and the metric charting buyer traffic nudged up one point to 44 this month.

In terms of regions, the index for the Northeast declined five points to 45, while the one for the Midwest fell three points to 52 and the index for the South also slipped three points, to 62. The gauge for the West edged down one point to 67.

NAHB chief economist Robert Dietz said: "Low unemployment, solid job growth and favourable demographics should support housing demand in the coming months.

"Builders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry-level of the market.

"Lower interest rates that peaked around 5 percent in mid-November and have since fallen to just below 4.5% will help the housing market continue to grow at a modest clip as we enter the new year."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This is a modest increase after big falls, totalling 12 points, over the previous two months. Homebuilders clearly were disturbed by the plunge in stock prices in the fourth quarter, which coincided with three straight months when housing market activity was hit by two hurricanes and the California wildfires.

"Now, though, these distortions have passed and the latest mortgage applications data are very encouraging, with purchase applications rising to a new cycle high in December. Accordingly, we expect both the home sales data and the NAHB index to rebound over the next few months. Sustained new highs in the index aren’t likely, but the all-encompassing gloom which has enveloped discussions of the housing market in recent months should soon begin to lift."