Builder confidence picks up as buyers return

Home builder confidence picked up pace in December as the housing market's recovery bounced back from two flat months, a positive sign heading into next year. 

The index rose 4 points to 58 after two months of stagnation as home buyers flocked back to the market after a 16-day government shutdown created uncertainty, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released Tuesday. 

The gain reflects improvement in all three index components — current sales conditions, sales expectations and traffic of prospective buyers.

"This is definitely an encouraging sign as we move into 2014," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. 

The index has increased 11 points in the past year and has been above 50 for the past seven months. 

"This indicates that an increasing number of builders have a positive view on where the industry is going," Judson said.

All three index components posted gains in December. 

The index gauging current sales conditions jumped 6 points to 64, while the expectations for future sales rose 2 points to 62. 

The third component examining traffic of prospective buyers gained 3 points to 44.

"The recent spike in mortgage interest rates has not deterred consumers as rates are still near historically low levels," said David Crowe, NAHB's chief economist David Crowe.

"Following a two-month pause in the index, this uptick is due in part to release of the pent-up demand caused by the uncertainty generated by the October government shutdown," he said. 

Home builders are expecting a gradual improvement in the housing recovery heading into next year.

Any number over 50 indicates that more builders view conditions as good than poor.

Regionally, the South edged up 1 point to 57 while the Northeast, Midwest and West each fell a single point to 38, 59 and 59, respectively.

Mortgage rates jumped by about a point over the summer but have settled down through the fall, remaining near historic lows and easing concerns that rising rates would put a bigger dent into the housing market's growth.

Overall, sales of new homes are making inroads, rising 25.4 percentage points in October, but they still remain well below what is considered a healthy level.