Confidence among U.S. homebuilders held steady in January at the highest level in nearly seven years, but builders are feeling slightly less optimistic about their prospects for sales over the next six months.
The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday held at 47, the same as in December and the highest reading since April 2006, just before the housing bubble burst.
Readings below 50 suggest negative sentiment about the housing market. The last time the index was at that level or higher was in April 2006 when the reading was 51. It began trending higher in October 2011, when it stood at 17.
The latest index, which is based on responses from 402 builders, comes at a time of improving fortunes for homebuilders, many of which have seen sales improve over the past year amid the best market for newly built homes since the housing boom.
Stable job gains, record-low mortgage rates and a tight supply of new and previously occupied homes available for sale have helped fuel home sales and drive prices higher, albeit from very low levels.
In November, sales of previously occupied homes rose to their highest level in three years, while new-home sales reached a 2 1/2-year high.
Those factors have helped make homebuilders more confident and spurred new home construction.
Even so, homebuilders' confidence remains restrained by uncertainty over how Washington lawmakers will resolve budget and tax issues, said Barry Rutenberg, the NAHB's chairman.
How lawmakers deal with those challenges could put a damper on housing demand in the coming months, he added.
A key concern is the possibility that Congress, which appears to be moving toward overhauling the tax code this year, will alter or eliminate the mortgage interest deduction.
The NAHB has said that tampering with homeowners' ability to deduct their mortgage interest payments from their taxable income could dampen demand for housing.
Builders also see tighter mortgage-lending standards and problems with the home appraisal process as impediments to a full housing recovery.
Some of that uncertainty appears to have crept into the latest confidence survey.
The index tracking builders' outlook for sales over the next six months slipped 1 point to 49, the lowest level since August, when it was 43.
However, a measure of current sales conditions was unchanged at 51, though still at the highest level since April 2006. And a gauge of traffic by prospective buyers increased 1 point to 37, also the highest reading since April 2006.
Though new homes represent only a fraction of the housing market, they have an out-size impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.