Home builder confidence increased for the third straight month in February amid expectations that mortgage rates will continue to moderate in the coming months, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
Home builders are reportedly optimistic that the Federal Reserve will cut interest rates later this year. Builder confidence in the market for new single-family homes increased four points to 48, its highest reading since August. The HMI index measuring current sales conditions rose four points to 52, while the component measuring sales expectations in the next six months increased three points to 60. The gauge of prospective buyers increased four points to 33.
NAHB expects single-family housing starts will increase 5 percent this year, noted Chief Economist Robert Dietz. More builders are not reducing home prices to increase sales as mortgage rates have been below 7 percent since mid-December. Twenty-five percent of builders cut home prices this month, down from 31 percent in January. The share of builders offering an incentive fell to 58 percent from 62 percent in January.
“While mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year,” said NAHB Chair Alicia Huey.
According to the U.S. Census Bureau, there were 1.331 million privately-owned housing starts in January, down 15 percent from the December estimate of 1.562 million but less than 1 percent under the January 2023 rate of 1.340 million. Privately-owned housing units authorized by building permits fell 1.5 percent to 1.470 million from 1.493 million in December. There were 1.015 million single-family authorizations, 1.6 percent higher than 999,000 in December.
Other January report findings included:
- There were 1.416 million privately-owned housing completions, 8.1 percent below the December estimate of 1.541 million.
- There were 857,000 single-family housing completions last month, down 16.3 percent from 1.024 million in December. The January rate for units with at least five units was 538,000.
- There were 1.004 million single-family housing starts, down 4.7 percent from 1.054 million in December.