Published by FOX Business | April 17, 2023
Confidence among U.S. homebuilders jumps as mortgage rates fall
Confidence among builders in the U.S. housing market increased more than expected in April as declining mortgage rates and low inventory helped drive demand higher for new homes.
The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, rose one point to 45, the highest reading since September.
Despite the increase, the index still points to a slump in the housing sector ahead of the pivotal spring-selling season. Any reading above 50 is considered positive; prior to 2022, the gauge has not entered negative territory since 2012, excluding a brief – but steep – drop in May 2020.
“For the fourth straight month, builder confidence has increased due to a lack of resale inventory despite elevated interest rates,” said Alicia Huey, the NAHB chair and a custom home builder and developer from Birmingham, Alabama. “Builders note that additional declines in mortgage rates, to below 6%, will price-in further demand for housing.”
The index has fallen to half of what it was just one year ago, when it stood at 81, although it has increased from a low of 31. It peaked at a 35-year high of 90 in November 2020, buoyed by record-low interest rates at the same time that American homebuyers – flush with cash and eager for more space during the pandemic – started flocking to the suburbs.
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve’s aggressive campaign to tighten policy and slow the economy.