Homebuilder sentiment took a little bit of a breather this week, but with last month's report printing the highest level since 1999, the pullback was expected. In fact, the drop from 74 down to 72 in the NAHB was right in line with consensus expectations. Even at the current level, there haven't been many other periods in the last 33 years where confidence was higher.

Looking at the breakdown of this month's report for January, sentiment regarding Sales (both Present and Future) and Traffic all declined this month.  While the overall levels did pullback this month, we would note that they are all still above levels they were at in November prior to the strong December reading, so, for now, it's just a small step back from a big leap forward. On a regional basis, sentiment declined in every region of the country this month except the Northeast, where it hit a new high. You may recall that in last month's update, we noted how the Northeast was the only region that saw a decline in sentiment. In other words, every category that increased last month decreased in January, and the only category that declines last month increased this month.