NAHB) Housing Market Index, which is a near real-time read on builder confidence, fell 2 points to 31 in December. Among the components of the index, current sales conditions fell 3 points to 36, buyer traffic remained at a very low 20 and sales expectations for the next six months rose four points to 35.

What’s the bottom line? Any reading above 50 on this index, which runs from 0 to 100, signals expansion while readings below 50 signal contraction. This month’s confidence reading is the lowest since mid-2012 (except for the onset of the pandemic in the spring of 2020), which is unsurprising given that construction costs remain elevated while higher interest rates have caused many homebuyers to pause their search.

However, NAHB chief economist Robert Dietz, noted that December marked the first time since April that “builders registered an increase in future sales expectations.” He added, “The silver lining in this HMI report is that it is the smallest drop in the index in the past six months, indicating that we are possibly nearing the bottom of the cycle for builder sentiment.”