Home builder confidence in the housing market for newly built houses rose three points from February to March, reaching 51, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). It was the fourth consecutive monthly gain, and the first time sentiment passed the breakeven point of 50 since July 2023.
NAHB credited the change to a lack of existing house inventory, strong demand, and mortgage rates below 7% since last December. That has allowed builders to pull back from reducing home prices to boost sales. In December, 36% of builders reported cutting home prices. In March, the number was down to 24%. That’s the lowest percentage since July 2023. However, the average price reduction — 6% — has been the same for the last nine months. The number of builders offering some kind of incentive has been between 58% and 62% since September 2023. In March 2024, it was 60%.
“Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year,” said NAHB Chairman Carl Harris, in prepared remarks. “But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”
“With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market,” said NAHB Chief Economist Robert Dietz, also in prepared remarks. “However, as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber.”
The monthly survey has been conducted for 35 years. It asks builders to gauge current home sales and expectations for the coming six months as either “good,” “fair,” or “poor.” Builders also rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores are used to develop a seasonally adjusted index. Any score over 50 means more builders see conditions as positive rather than negative.
The index of current sales conditions rose to 56; sales expectations for the next six months were up to 62; and the index for prospective buyer traffic was 34.
The index for the Northeast was up two points to 59; five points to 41 in the Midwest; four to 50 in the South; and a five point gain to 43 in the West.
Multifamily Spring:
Multifamily Spring is coming to New York City this April 18. This year’s program will bring together the industry’s most influential and knowledgeable real estate executives from the multifamily sector for 5 hours of face-to-face networking and over 5.5 hours of can’t miss sessions. Learn more or register here.