The National Association of Home Builders (NAHB) reported that its housing market index for December is at 39, slightly higher than the expected 38. This indicates a small uptick in builder confidence in the U.S. housing market. The increase in the index shows that builders are cautiously optimistic about sales conditions and future prospects. Even with ongoing supply chain problems and rising interest rates, builders are feeling more positive.

The Importance Of The NAHB Index

This data provides valuable insights into the current housing market and may influence future construction and home price trends. The December index score of 39, above the predicted 38, suggests that the housing sector’s previous pessimism may be leveling off. This could signal a good opportunity to take cautiously bullish positions, such as buying call options on homebuilder ETFs like XHB in the coming weeks. This trend matches other recent economic indicators. Reports from early December revealed that 30-year mortgage rates have dropped to 6.75%, down from over 7.5% in October 2025. Lower borrowing costs help improve builder sentiment, supporting the idea that the worst may be behind us in the housing market.

Historical Comparisons And Future Prospects

Looking back to late 2022, the NAHB index hit a low of about 31 before homebuilder stocks surged in anticipation of fewer interest rate hikes by the Federal Reserve. This history shows that even a small rise from a low index can signal strong equity performance. This cautious optimism may also apply to related sectors. Companies that supply building materials, like lumber and paint, are closely linked to construction activity. It would be wise to explore call options on these major suppliers and home improvement retailers, as they could benefit if builder confidence continues to stabilize. However, it’s important to keep in mind that an index of 39 still indicates a shrinking market. Any bullish trades should be managed carefully, perhaps using call spreads to limit risk and reduce costs. This strategy allows us to participate in potential gains while safeguarding our capital in case this turns out to be a false bottom. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now