America’s homebuilders are growing more bullish as buyer demand picks up, driven in part by slightly lower mortgage rates.
Homebuilder confidence in the market for newly built single-family homes in February rose 7 points to 42, according to the National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since September and the largest monthly gain since June 2013.
related investing news
Anything below 50 is considered negative, but sentiment had fallen to 31 in December. The index stood at 81 in February of last year, before mortgage rates began to rise.
Builders say affordability is improving, as mortgage rates fall back from their highs of last fall and start to settle in a narrow range. The average rate on the popular 30-year fixed mortgage had peaked at 7.37% last October, according to Mortgage News Daily but spent much of January in the low 6% range. Rates have moved up slightly in the past two weeks to the mid-6% range.
“With the largest monthly increase for builder sentiment since June 2013, the HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market,” said NAHB Chairman Alicia Huey, a homebuilder and developer from Birmingham, Alabama. “The nation continues to face a sizeable housing shortage that can only be closed by building more affordable, attainable housing.”
A construction worker works atop a home, as a subdivision of homes is built in San Marcos, California, January 31, 2023.
Mike Blake | Reuters
Huey called it “cautious optimism,” adding that affordable housing is still difficult to build, given higher costs for labor and materials.
Of the NAHB index’s three components, current sales conditions in February rose 6 points to 46. Sales expectations in the next six months increased 11 points to 48, and buyer traffic climbed 6 points to 29.
Builders had been using strong incentives to offset higher mortgage rates, but they appear to be pulling back on those as…
Read the full article here
