Builder sentiment rose seven points to 44 in January; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to NAHB. It reached a record high of 90 in November 2020.
All three components of the homebuilder index increased, with sales expectations in the next six months jumping 12 points to 57; current sales conditions climbing seven points to 48; and buyer traffic rising five points to 29.
Falling mortgage rates likely contributed to the growing optimism; mortgage interest rates fell from around 8% in mid-October 2023 to the 6% range in December 2023.
“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 NAHB Chairman Alicia Huey. “Single-family starts are expected to grow in 2024, adding much needed inventory to the market. However, builders will face growing challenges with building material cost and availability, as well as lot supply.”
Thirty-one percent of builders reported cutting prices in January, which is down from 36% in December 2023. The average price discount is holding at 6%. Additionally, 62% of builders provided sales incentives of all types in January, which is up from 60% in December 2023.
