US homebuilders are moving more quickly as buyer demand is driven by slightly lower mortgage rates.
Homebuilder confidence in the market for newly constructed single-family homes rose seven points to 42 in February National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since September and the biggest monthly gain since June 2013.
Anything below 50 is considered negative, but Sentiment fell to 31 in December, The index stood at 81 in February last year before mortgage rates started rising.
Builders say affordability is improving, as mortgage rates fall from their highs last fall and begin to settle in a narrow range. The average rate on the popular 30-year fixed mortgage peaked last October at 7.37%, according to Mortgage News Daily, but spent most of January in the low 6% range. rates have gone up A little bit in the mid-6% range over the last two weeks.
“With the largest monthly increase for builder sentiment since June 2013, the HMI indicates that the incremental gains for housing affordability are driving buyers into market prices,” said Alicia, a homebuilder and developer from Birmingham, Alabama and president of the NAHB. Huey said. “The nation is facing a huge housing shortage that can only be closed by creating more affordable, attainable housing.”
A construction worker works on top of a house as a subdivision of homes on January 31, 2023 in San Marcos, California.
Mike Blake | reuters
Huey calls it “cautious optimism” that affordable housing is still hard to buildGiven the high cost for labor and materials.
Of the three components of the NAHB index, sales open positions rose six points to 46 in February. Sales expectations for the next six months rose 11 points to 48, and buyer traffic rose six points to 29.
Builders were using strong incentives to offset higher mortgage rates, but they’re pulling back on them once rates stabilize.
The NAHB reports that 31% of builders decreased home prices in February, down from 35% in December and 36% in November. The average price decline was 6% in February, down from 8% in December, and tied with 6% in November. The share of builders offering any type of incentive, such as mortgage rate buyouts, fell to 57% in February, down from 62% in December and 59% in November.
“While the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed the highest mortgage rates for this cycle,” said Robert Dietz, NAHB chief economist. “And while we expect ongoing volatility for mortgage rates and housing costs, the building construction market should be able to stabilize over the coming months, followed by a return to homebuilding levels later in 2023 and early 2024.” There will be a return to the trend.”
Regionally, the sentiment in Northeast moved up 4 points to 37, taking a look at the three-month moving average. In the Midwest it rose one point to 33, and in the South the score rose to 40. In the West, where housing is the least affordable, it rose three points to 30.