America’s homebuilders haven’t felt this good since the last millennium.
On Monday, the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) — more commonly known as homebuilder sentiment — hit an 18-year high of 74, topping expectations for a reading of 70 and well above last month’s reading of 69. This index is calculated on a scale of 1-100.
Notably, confidence among America’s homebuilders is now at a higher level than it was at any point during the housing bubble.
“The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise,” said NAHB Chief Economist Robert Dietz.
“With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year.”
Ian Shepherdson, an economist at Pantheon Macroeconomics, said the report was “very strong everywhere,” and notes that this report points to strong home sales into the spring.
Analysts at Bespoke Investment Group noted, however, that the survey’s regional components indicated while overall spirits are high, the Northeast appears to be bracing for negative housing market impacts from the Republican tax plan, which appears poised to become law this week.
Confidence among homebuilders in the region fell 8 points in December, the only region where the index declined and putting the Northeast well behind the Midwest, South, and West in terms of overall views on the housing market.
The current GOP tax plan caps mortgage interest deductions at $750,000, down from the current cap of $1 million but slightly better than the $500,000 that had been discussed earlier in the process.
Coupling this, however, with the lower deductions for state, local, and property taxes — now capped at $10,000 — has many expecting that states like New York and New Jersey will be negatively affected by the GOP tax plan as the highest earners likely face significantly higher tax burdens, potentially leading to out-migration from these states or pressuring high-end home prices.
Both of these states have some of the highest home values in the country.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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