Builder sentiment increased four points to 35 in January; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to cnbc.com. It reached a record high of 90 in November 2020.
The increase marks the first time in 12 straight months the NAHB/Wells Fargo Housing Market Index has risen.
Of the homebuilder index’s three components, current sales conditions rose four points to 40; sales expectations in the next six months increased two points to 37; and buyer traffic rose three points to 23.
Builders and consumers likely are responding to the recent decline in mortgage rates; the average contract interest rate on the 30-year fixed mortgage peaked at 7.37% at the end of October 2022 and was 6.17% as of Jan. 17.
“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.”