Home builder confidence increased for the fourth straight month in March as buyer demand remains strong, according to the National Association of Home Builders/ Wells Fargo Housing Market Index.
All three HMI indices increased this month. The index measuring current sales conditions increased four points to 56, and the measurement of sales expectations in the next six months increased two points to 62. The gauge of prospective buyer traffic increased two points to 34. Builder confidence in the market for new single-family homes increased three points to 51, which is the highest level since July and its fourth consecutive monthly gain.
“Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year,” said NAHB Chair Carl Harris. “But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”
Twenty-four percent of builders reported reducing home prices, down from 36 percent in December and its lowest mark since July 2023. NAHB Chief Economist Robert Dietz said lower financing costs will attract more homebuyers into the market as the Federal Reserve starts cutting interest rates in the second half of this year.
The Fed kept interest rates above 5 percent this month. Chair Jerome Powell said the central bank won’t start cutting interest rates until it becomes more confident that inflation is sustainably moving toward its long-term 2 percent target. Powell expects that will occur later this year.
According to the U.S. Census Bureau, there were 1.518 million private housing units authorized by building permits in February, up nearly 2 percent from 1.489 million in January. There were 429,000 authorizations of units in buildings with at least five units last month.
There were 1.521 million private housing starts in February, up 10.7 percent from the previous month and 5.9 percent from February 2023. The number of single-family housing starts increased 11.6 percent to 1.129 million.
Other February report findings included:
- There were 1.729 million private housing completions, up 19.7 percent from January.
- There were 1.072 million single-family housing completions, up 20.2 percent from 892,000 in January.
- Single-family authorizations increased 1 percent to 1.031 million.