Builder confidence in the market for newly built single-family homes climbed seven points to 44 in January, according to the National Association of Home Builders (NAHB)/Wells Fargo (NYSE:WFC) Housing Market Index (HMI). This marked the second consecutive month where the HMI was on the rise.
All three of the major HMI indices posted gains in January. The HMI index charting current sales conditions increased seven points to 48, the component measuring sales expectations in the next six months jumped 12 points to 57 and the component gauging traffic of prospective buyers rose five points to 29.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased four points to 55, the South increased two points to 41, the West registered a one-point gain to 32 and the Midwest held steady at 34.
“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.”
Although mortgage rates have fallen below 7% over the past month, many builders continue to reduce home prices to boost sales. NAHB reported that 31% of builders reported cutting home prices this month, down from 36% during the previous two months and the lowest rate since last August. The average price reduction in January remained at 6%, unchanged from the previous month. Meanwhile, 62% of builders provided sales incentives of all forms in January – this share has remained stable between 60% and 62% since October.
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