The level of builder confidence is the largest increase in almost 10 years

In January, homebuilder confidence posted its biggest monthly rise in nearly 10 years.

That’s according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index released on February 15th. Builders’ confidence in the new-build single-family home market rose seven points to 42.

Including the January report, it was two straight monthly gains for builders’ confidence, driven in part by easing mortgage rates.

NAHB President Alicia Huey said rising builder confidence could be a sign the housing market is turning — even as builders continue to grapple with higher construction costs and supply chain issues.

“With the largest monthly increase in builder sentiment since June 2013, the HMI shows that incremental gains in housing affordability have the potential to add value to the buyer’s market,” said NAHB President Alicia Huey , a custom home builder and developer from Birmingham. Alas. “The nation continues to face a significant housing shortage that can only be closed by building more affordable, affordable housing.”

Entry-level home building remains challenging

Huey called on policymakers “to help reduce the cost of land development and housing construction through regulatory reform.”

The level of builder confidence is the largest increase in almost 10 years

Mortgage rates expected to rise

The average 30-year fixed-rate mortgage rate peaked at 7.08 percent in October, according to Freddie Mac. Although interest rates dipped to around 6.1% in early February, the 10-year Treasury yield has risen more than 30 basis points in the past two weeks, pointing to a rise in mortgage rates ahead.

NAHB Chief Economist Robert Dietz said projections show the housing market has outpaced prime mortgage rates. The rise in the Housing Market Index is encouraging, Dietz said.

“While the HMI remains below the dead level of 50, the increase from 31 to 42 from December to February is a positive sign for the market,” said NAHB Chief Economist Robert Dietz. “And while we expect continued volatility in mortgage rates and housing costs, the building market should be able to achieve stability in the coming months.

Dietz added that the NAHB expects a “rebound” in homebuilding levels later in 2023 and early 2024. He said builders continue to offer a variety of incentives to attract buyers.

Numbers from the housing market

31% of builders cut home prices in February, down from 35% in December and 36% in November.

The average price decline in February was 6%, down from 8% in December and equal to 6% in November.

57% offered some kind of incentive in February, up from 62% in December and 59% in November.

About the Housing Market Index

Derived from a monthly survey conducted by NAHB for more than 35 years, the NAHB/Wells Fargo HMI measures builders’ perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or ” Poor.” The survey also asks manufacturers to rate potential buyer traffic as “high to very high,” “average” or “low to very low.” Scores for each item are then used to calculate a seasonally adjusted index where any number above 50 indicates that more manufacturers see conditions as good than bad.

All three HMI indexes posted gains for the second consecutive month. The HMI index measuring current sales conditions in February rose six points to 46, parts mapping sales expectations over the next six months rose 11 points to 48 and the index measuring the movement of prospective buyers rose six points to 29.

Looking at three-month moving averages for regional HMI scores, the Northeast rose four points to 37, the Midwest rose one point to 33, the South rose four points to 40 and the West moved three points higher to 30.

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Image: Depositphotos

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