US homebuilder confidence rises to highest level since July: NAHB

UNITED States homebuilder confidence rose in March to the highest level since last July, due to lower mortgage rates and an improved pricing environment amid a continued existing home inventory shortage, the National Association of Home Builders (NAHB) said on Monday (Mar 18).

The NAHB/Wells Fargo Housing Market Index of builder confidence rose to 51 this month from an unrevised 48 in February. A Reuters poll showed economists expected the outlook to remain unchanged at 48 in March.

“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,” NAHB chairman Carl Harris said.

Traffic slowed during the second half of last year on the back of the Federal Reserve’s interest-rate hikes, which were launched in March 2022 in an effort to curb rising inflation. The monetary policy tightening drove the average rate on the 30-year fixed-rate mortgage to two-decade highs near 8 per cent in October.

With the US central bank likely near the end of its rate hiking cycle, the 30-year fixed-rate mortgage averaged 6.74 per cent for the week ended Mar 14, according to Freddie Mac. The drop has drawn buyers from the sidelines, raising the index of prospective buyers from a 13-month low of 21 in November to 34 in March, the highest since August 2023, according to the NAHB.

The easing of mortgage rates has also allowed builders to hold off on slashing home prices. As recently as December, more than a third of builders reported offering price concessions. In March, that was down to 24 per cent, the lowest level since July 2023, the NAHB said, but 60 per cent were still offering some form of incentive.

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The boost in builders’ sentiment may lead to an increase in single-family home starts throughout 2024, according to Nancy Vanden Houten, lead economist at Oxford Economics.

“More than half of homebuilders continue to offer some kind of incentive to encourage sales,” she said. “Those incentives, along with a shortage of existing homes for sale and an increase in single-family housing starts, should support new home sales in the months ahead.”

The US government is scheduled on Tuesday to release housing starts and building permits data for February, with a Reuters poll indicating both likely rebounded from their drops in January. New home sales are expected to have risen for a third straight month in February, according to another Reuters poll – that data is due to be released next week. REUTERS