NAHB Reports Builder Sentiment Rises Above Breakeven Point
(Illustration courtesy of NAHB/Wells Fargo)
Strong demand and mortgage rates below last fall’s cycle peak helped push builder sentiment above a key marker in March, the National Association of Home Builders/Wells Fargo Housing Market Index reported Monday.
Builder confidence in the market for newly built single-family homes climbed three points in March to 51, the NAHB/Wells Fargo Housing Market Index said. This represents the highest level since July 2023 and marks the fourth consecutive monthly gain for the index.
“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, a custom home builder from Wichita, Kan. “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 mortgage rates below 7% since mid-December, more builders are cutting back on reducing home prices to boost sales. In March, 24% of builders reported cutting home prices, down from 36% in December 2023 and the lowest share since July 2023. However, the average price reduction in March held steady at 6% for the ninth straight month, the report said.
Meanwhile, the use of sales incentives is holding firm. The share of builders offering some form of incentive in March was 60% and this has remained between 58% and 62% since last September.
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 are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
