The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rose 7 points to 44 in January. This second consecutive monthly increase in builder confidence closely tracks with a period of falling interest rates.
“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, a custom home builder and developer from Birmingham, Ala. “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.”
“Mortgage rates have decreased by more than 110 basis points since late October per Freddie Mac, lifting the future sales expectation component in the HMI into positive territory for the first time since August,” said NAHB Chief Economist Robert Dietz. “As home building expands in 2024, the market will see growing supply-side challenges in the form of higher prices and/or shortages of lumber, lots and labor.”
The HMI index charting current sales conditions increased 7 points to 48, the component measuring sales expectations in the next 6 months jumped 12 points to 57 and the component gauging traffic of prospective buyers rose 5 points to 29.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased 4 points to 55, the South increased 2 points to 41, the West registered a 1-point gain to 32 and the Midwest held steady at 34.
Read the NAHB release.