Home builder confidence increased this month as mortgage rates hovered at well under 7 percent over the past month, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
Builder confidence in the market for new single-family homes increased seven points to 44, which was the second straight monthly increase. Between Dec. 1 and 7, 30-year fixed-rate mortgage rates dropped to 6.95 percent from 7.05 percent, according to mortgage finance agency Freddie Mac. That rate has remained in a narrow range ever since, according to a Jan. 25 Freddie Mac report, settling in at 6.69 percent last week. The housing market is reportedly still expected to see increasing supply-side challenges this year through higher prices and/or shortages in labor, lots and lumber.
Thirty-one percent of builders reportedly reduced home prices this month, down from 36 percent during the previous two months and its lowest mark since August. The average home price reduction stayed at 6 percent this month, unchanged from December. Sixty-two percent of builders provided sales incentives in January.
“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 Chair 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.”
According to the U.S. Census Bureau, 1.469 million housing units were authorized by building permits last year, an 11.7 percent drop from 1.665 million in 2022. Private housing units authorized by building permits increased 1.9 percent last month to 1.495 million from 1.467 million in November, which is 6.1 percent higher than 1.409 million in December 2022. The number of single-family housing authorizations increased 1.7 percent in December to 994,000 from 977,000 in November.
Other report findings included:
- There were 1.460 million privately-owned housing starts last month, a 4.3 percent drop from 1.525 million in November but still 7.6 percent higher than the December 2022 rate of 1.357 million. There were 1.574 million privately-owned housing completions last month, 8.7 percent higher than November and a 13.2 percent increase from 1.390 million in December 2022. An estimated 1.452 million housing units were finished last year, up 4.5 percent from 1.390 million in 2022.
- There were 1.027 million single-family housing starts last month, 8.6 percent lower than 1.124 million in November. Construction began on an estimated 1.413 million housing units last year, down 9 percent from 1.552 million in 2022.
- The number of single-family housing completions increased 8.4 percent last month to 1.056 million from 974,000 in November.
