Confidence among builders in the U.S. housing market rose in January for the second straight month as high mortgage rates continued to fall.
The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, rose five points to 44, more than expected. The increase followed a three-point gain in December.
Any reading below 50 is considered negative.
“Lower interest rates improved housing affordability conditions this past month, bringing some buyers back into the market after being sidelined in the fall by higher borrowing costs,” said Alicia Huey, NAHB chair and a custom home builder and developer from Birmingham, Alabama.
HOME FORECLOSURES ARE ON THE UPSWING NATIONWIDE
Sentiment among builders began steadily falling at the end of the summer after mortgage rates shot above 7%, throttling demand among would-be homebuyers. But borrowing costs have retreated over the past two months as many investors believe the Federal Reserve is done with its aggressive interest-rate hike campaign – and will soon pivot to cutting rates.
Rates on the popular 30-year fixed mortgage are currently hovering around 6.66%, according to Freddie Mac, down from a high of 7.79% at the end of October but well above the pre-pandemic average of 3.9%.
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
The recent decline has prompted a burst of optimism among homebuilders that the worst may be over. However, the housing market is facing new headwinds heading into 2024, including higher prices and shortages of labor and lumber.
“Mortgage rates have decreased by more than 110 basis points since late October, lifting the future sales expectation component into positive territory for the first time since August,” said NAHB chief economist Robert Dietz. “As home building expands in 2024, the market will see growing supply-side challenges.”
Read the full article here
