Builder confidence moved up for the fourth consecutive month despite ongoing inflation concerns and delays in production. For newly built single-family homes, confidence increased by one point to 84 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI)—tying for the highest reading of the year since February.

Key findings:

The HMI index gauging current sales conditions increased by one point to 90, while the index measuring traffic of potential buyers increased by one point to 70. The gauge for sales expectations in the next six months held firm for the third month in a row at 84.

Looking at the regional breakdown, the Northeast increased four points to 74, the Midwest posted a two-point gain to 74, and the South and West increased by three points each to 87.
 
The takeaway:

"While demand remains strong, finding workers, predicting pricing and dealing with material delays remains a challenge," said NAHB Chairman Chuck Fowke in a statement. "Policymakers need to work on supply chain improvements and controlling costly inflation. Addressing lumber tariffs would be a good place to start."

"The most pressing issue for the housing sector remains lack of inventory," said NAHB Chief Economist Robert Dietz in a statement. "Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24% higher than the pre-COVID 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability." 

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