NAHB/Wells Fargo: Builder Sentiment Rises as Rates Dip
(Image courtesy of NAHB/Wells Fargo)
Falling mortgage rates helped end a four-month decline in builder confidence, and recent economic data signal improving housing conditions heading into 2024, the National Association of Home Builders/Wells Fargo Housing Market Index reported.
Builder confidence in the market for newly built single-family homes rose three points to 37, the NAHB/Wells Fargo Housing Market Index found.
“The housing market appears to have passed peak mortgage rates for this cycle, and this should help to spur home buyer demand in the coming months, with the HMI component measuring future sales expectations up six points in December,” NAHB Chief Economist Robert Dietz said.
With mortgage rates still running above 7% throughout November per Freddie Mac, many home builders continue to reduce home prices to boost sales. In December, 36% of builders reported cutting house prices, tying the previous month’s high point for 2023. The average price reduction in December remained at 6%, unchanged from the previous month. Meanwhile, 60% of builders provided sales incentives of all forms in December, the same as November but down slightly from 62% in October.
The NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component yield a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index gauging traffic of prospective buyers in December rose three points 24, the component measuring sales expectations in the next six months increased six points to 45 and the component charting current sales condition held steady at 40.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 51, the Midwest fell one point to 34, the South dropped three points to 39 and the West posted a four-point decline to 31.
