U.S. homebuilders are more confident in their business than they have been since last summer as they see better demand despite high mortgage rates.
Homebuilder confidence index rose 3 points to 51 in March National Association of Home Builders/Wells Fargo Housing Market Index. The reading rose for the fourth consecutive month and hit the highest level since July.
Market sentiment has entered positive territory for the first time since July. Fifty is the line between positive and negative emotions.
Mortgage rates fell in the first week of March but rose again in the second week. The average interest rate on the popular 30-year fixed mortgage has been hovering around 7% since early February.
“Buyer demand remains strong, and if mortgage rates continue to fall later this year, we expect more consumers to exit,” said Carl Harris, president of NAHB, a custom home builder from Wichita, Kan. Wait and see and get into the market.” “But despite strong pent-up demand, builders still face some supply-side challenges, including a scarcity of buildable lots and skilled labor, as well as new restrictive regulations that continue to increase the number of homes being built. cost.”
Among the index’s three components, current sales conditions rose 4 points to 56, expectations for the next six months rose 2 points to 62, and buyer flow increased 2 points to 34.
Regionally, the Midwest and West experienced the largest increases in sentiment when looking at the three-month moving average.
The report also noted that fewer builders are lowering home prices to attract buyers. In March, 24% of builders reported lowering home prices, down from 36% in December 2023 and the lowest proportion since July.
The average price reduction has stabilized at around 6%. Builders are still using sales incentives such as lower mortgage rates.
“With the Fed expected to announce interest rate cuts in the second half of 2024, lower financing costs will attract many potential buyers to the market,” said NAHB Chief Economist Robert Dietz. “However, as homebuilding activity increases, construction Businesses may face rising material prices, especially lumber.”
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