Builder Confidence Up for 1st Time in a Year

Builder confidence in the housing market rose for the first time in 12 months, the National Association Home Builders reported Wednesday, as a drop in mortgage interest rates brought out more potential new home buyers.

The NAHB/Wells Fargo Housing Market Index rose by four points in January to 35. All three HMI indices posted gains for the first time since December 2021. The HMI index gauging current sales conditions in January rose four points to 40; the component charting sales expectations in the next six months increased two points to 37; and the gauge measuring traffic of prospective buyers increased three points to 23.

Looking at the three-month moving averages for regional HMI scores, the West registered a one-point gain to 27, the South held steady at 36, the Northeast fell four points to 33 and the Midwest dropped two points to 32.

“While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” said NAHB Chief Economist Robert Dietz. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability. Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units.”

“It appears the low point for builder sentiment in this cycle was registered in December, even as many builders continue to use a variety of incentives, including price reductions, to bolster sales,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023.”