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Today, the National Association of Home Builders (NAHB) released its latest Housing Market Index (HMI) showing that assessments of housing activity worsened in January with the composite HMI index falling to 56 while the "buyer traffic" index declined to a level of 40.

It's important to note that while the last few months results have suggested a pullback of sorts for home builder activity, the latest trend has been very strong and consistent with the overall recovery seen in the nation's housing markets.

Looking at the data, it is fairly clear that the last year of results indicate a major change in builder sentiment likely coming as a result of improvements in confidence given the notable rise in buyer traffic, reduced inventory and a more balanced monthly supply.

Source: Homebuilder Blues: NAHB / Wells Fargo Home Builder Ratings January 2014