According to the National Association of Homebuilders/Wells Fargo Homebuilders Market Index for December, builder confidence recovered in with a reading of 58. This surpassed both expectations of 56 and last month’s reading of 54.

Analysts noted that builder confidence has steadied after the government shutdown. December’s reading was the highest in four months. Dave Crowe, NAHB chief economist, said that his organization was expecting a “gradual improvement in the housing recovery” in 2014.

Any reading above 50 indicates that more builders are confident about overall housing market conditions than not.

Builder Confidence – Highest Reading Since 2005

Pent-up demand for housing is driving housing markets in spite of higher mortgage rates. Three components of builder confidence used to calculate the overall reading also rose in December. Builder confidence in current home sales rose to 64 from a reading of 58 in November; this is the highest reading since 2005.

Confidence levels in housing markets over the next six months rose to 62 from last month’s reading of 60. Builder confidence also grew in the area of buyer foot traffic in new developments and gained three points to a reading of 44.

All of this is good news, but the NAHB said that a gap remains between higher home builder confidence and the rate of new home construction. A seasonal lull in home construction is not unusual especially in areas experiencing harsh weather.

More Jobs, Low Refinance Numbers Could Mean More Mortgages Available

MarketWatch analysts suggest that if the economy continues to add jobs “at a brisk pace” and mortgage lenders ease lending requirements next year, the demand for homes could further strengthen the U.S. housing market next year.  

Low numbers of refinance mortgages in 2013 may cause some lenders to loosen mortgage credit requirements, which were tightened after the housing bubble burst.

Economic News scheduled for today may provide a broader picture of economic health and likely trends for 2015. The Federal Reserve’s Federal Open Market Committee will provide its expected statement after its meeting, and Fed Chairman Ben Bernanke will give his last press conference as Fed chair as well.

Any indication of plans to reduce the Fed’s current quantitative easing program could upset financial and mortgage markets, but most economic analysts don’t expect an announcement of tapering the Fed’s asset purchases before next year.

Data on November Housing Starts and Building Permits will also offer clues as to how housing markets and the general economy are doing.