US homebuilder sentiment edges up with help from incentives
Mortgage rates have been hovering in the 6.3% to 6.4% range for the past couple of months
[ATLANTA] Confidence among US homebuilders edged up in December as builders continued to deploy sales incentives to motivate buyers.
An index of market conditions from the National Association of Home Builders (NAHB) and Wells Fargo rose one point this month to 39, the highest since April. Still, a value below 50 means more builders see conditions as poor than good.
Mortgage rates have been hovering in the 6.3 to 6.4 per cent range for the past couple of months, near their one-year lows, which has marginally helped to move some buyers off the sidelines. However, builders have still been forced to offer price breaks and other concessions that are eating into profits.
This month, 67 per cent of builders reported using sales incentives, a record in the post-Covid-19 period, while a still-high 40 per cent reported cutting prices.
“Builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high,” said Robert Dietz, chief economist at the NAHB. “Rising inventory also has increased competition for newly built homes.”
Among the components of NAHB’s survey, a gauge of sales expectations for the next six months climbed one point to 52 in December, the third straight month that future expectations exceeded the break-even level. Meantime, a measure of present sales edged up one point to 42, while an index of prospective buyer traffic was flat.
While the US Federal Reserve lowered interest rates for a third straight meeting last week, it’s not clear how much that will translate into lower home-financing costs. Consumer sentiment data show that many remain troubled by a stubbornly high cost of living.
But economists and industry analysts see a modest pickup in the housing market in 2026 as prices decline in many cities, especially in the Sun Belt region, and as the number of people locked into lower-rate mortgages dwindles.
Home closings among publicly traded builders are expected to rise a bit next year after an anticipated 4 per cent drop in 2025, Bloomberg Intelligence analyst Drew Reading said in a Dec 1 note.
By region, builder sentiment rose the most in the Midwest, and also picked up in the West. Sentiment in the South, the biggest homebuilding region, slipped. BLOOMBERG
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