Lower Interest Rates Stabilize Builder Confidence
Buoyed by falling mortgage rates, builder confidence in the market for newly built single-family homes rose two points to 58 in January on the National Association of Home Builders/Wells Fargo Housing Market Index.
“The gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Low unemployment, solid job growth and favorable demographics should support housing demand in the coming months.”
“Builders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry-level of the market,” said NAHB Chief Economist Robert Dietz. “Lower interest rates that peaked around 5 percent in mid-November and have since fallen to just below 4.5 percent will help the housing market continue to grow at a modest clip as we enter the new year.”
Due to the partial government shutdown, there will be no government figures released tomorrow on housing starts and permits. NAHB estimates that the December government data would show that single-family starts ended the year totaling 876,000 units, which would mark a 3 percent gain over the 2017 total of 848,900. However, the slowdown in sales during the fourth quarter of 2018 has left new home inventories elevated in some markets.
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index 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.
All the HMI indices posted gains in January. The index measuring current sales conditions rose two points to 63, the component gauging expectations in the next six months increased three points to 64 and the metric charting buyer traffic edged up one point to 44.
Looking at the three-month moving averages for regional HMI scores, the Northeast dropped five points to 45; the Midwest and South both fell three points to 52 and 62, respectively; and the West registered a one-point drop to 67.