Home Markets The mood of home builders rises in January for the first time in a year

The mood of home builders rises in January for the first time in a year

by SuperiorInvest

Builder sentiment in the single-family housing market rose unexpectedly in January for the first time in 12 consecutive months. Economists had predicted a slight decline.

Sentiment rose 4 points to 35 on the National Association of Home Builders/Wells Fargo Housing Market Index. Anything below 50 is still considered negative sentiment. The metric was at 83 in January 2022.

“The lowest point for builder sentiment this cycle appears to have been in December, although many builders continue to use various incentives, including price cuts, to boost sales,” said Jerry Konter, NAHB chairman and a Savannah homebuilder. Georgia. “The uptick in builder sentiment also means that cyclical lows for permits and starts are likely to be approaching, and a recovery in homebuilding could begin later in 2023.”

Homes under construction are seen in Tucson, Arizona, U.S., Tuesday, Feb. 22, 2022. U.S. new home sales eased in January after a flurry of purchases at the end of 2021, suggesting a jump in mortgage rates may start to curb demand.

Rebecca Noble | Bloomberg | Getty Images

All three components of the index posted gains in January: current sales conditions rose 4 points to 40, sales expectations over the next six months rose 2 points to 37, and buyer traffic rose 3 points to 23.

Both builders and consumers are likely reacting to the recent decline in mortgage rates. The average contract interest rate for a 30-year fixed mortgage last peaked at 7.37% in late October, according to Mortgage News Daily. It then fell during December and on Tuesday was 6.17%.

“While the NAHB is forecasting a decline in single-family home starts this year compared to 2022, it appears that a tipping point for housing is upon us,” said Robert Dietz, NAHB’s chief economist. “In the coming quarters, single-family home construction will rise from the lows of the cycle as mortgage rates are expected to decline and increase housing affordability.”

New data shows a sharp rise in mortgage demand

Dietz noted that the country still has a structural housing deficit of 1.5 million units and said better affordability should boost demand.

Home mortgage application rate rose sharply last week, according to the Mortgage Bankers Association. Unfortunately, the number of new advertisements on the market is lower than a year ago.

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