More Housing Coming? Home Builder Confidence Holds in December

Home builders are feeling optimistic

The supply of for-sale housing, and lack thereof, is perhaps the biggest detriment to home buyers today.

Due to its cascading effect, the inventory scarcity drives up competition and then, prices. But could help be on the way?

It’s beginning to look like it, as a leading indicator of housing inventory held at its highest point since April.

Home Builder confidence improves

Home builder sentiment ebbs and flows based on consumer demand, market conditions, shifting costs and supply chain status.

Every month, the National Association of Home Builders (NAHB) and Wells Fargo survey NAHB members to measure this sentiment on a 0-100 scale in their Housing Market Index (HMI) report. The survey comprises three components for single-family housing: current home sales, home sales over the next six months, and traffic of prospective buyers.

In December, builder confidence held at a score of 46, static from November and up from 37 in December 2023. The index stayed at its highest point since April 2024.

“NAHB is forecasting additional interest rate cuts from the Federal Reserve in 2025, but with inflation pressures still present, we have reduced that forecast from 100 basis points to 75 basis points for the federal funds rate,” said NAHB Chief Economist Robert Dietz. “Concerns over inflation risks in 2025 will keep long-term interest rates, like mortgage rates, near current levels with mortgage rates remaining above 6%.”

All three index components experienced monthly gains as well. Current sales held at 48, sales in the next six months went to 66 from 63, and prospective home buyer traffic dipped to 31 from 32.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 57. Next came an HMI of 46 in the Midwest, 44 in the South, and 40 in the West.

What other indicators of housing inventory say

In November, active home listings increased 26.2% annually, reaching the highest level since December 2019, according to Realtor.com.

Among the 50 largest cities in the U.S., San Diego saw a 52.5% yearly jump in active listing count, trailed by 50.9% in Miami and 50.7% in Denver. New York experienced the smallest annual gain, falling 1.1%. Hartford, Conn., and Cleveland followed with growths of 4% and 7.4%, respectively.

For a look ahead, the Census Bureau and Department of Housing and Urban Development put out a joint Monthly New Residential Construction Report, with three leading indicators of housing inventory.

First, building permits hit a seasonally adjusted annual rate (SAAR) of 1.505 million in November. That figure rose 6.1% month-over-month but dipped 0.2% year-over-year.

Next, housing starts reached a SAAR of 1.289 million, down 1.8% monthly and 14.6% annually. Lastly, a SAAR 1.601 million houses were completed in November, 1.9% lower than September but 9.2% above November 2023.

“NAHB is forecasting single-family starts to post a slight increase in 2025 as the financing conditions for builders improve modestly,” said Dietz. “The significant decline for apartment construction is forecasted to end, with that market stabilizing during the second half of next year.”

The bottom line for home buyers

Between low affordability and not enough listings, home buying has been challenging for prospective borrowers.

If you’re a house hunter, it’ll be helpful to grab every advantage you can. Always be prepared so you can move fast, negotiate your mortgage rate, and see if you qualify for down payment and/or closing cost assistance.

If you’re ready to take the next step to homeownership, reach out to a local mortgage professional.