Builder confidence has improved

January 24, 2019 12:46 pm

Builder confidence has improved in January 2019, thanks for falling mortgage rates in the United States.

Builder confidence has improved in the market for newly-built single-family homes, which rose two points to 58. So states the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

NAHB Chairman, Randy Noel, says, “The gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment. Low unemployment, solid job growth and favorable demographics should support housing demand in the coming months.”

Low interest rates will help the market grow

Chief Economist, Robert Dietz, says, “Builders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry-level of the market.

“Lower interest rates that peaked around 5% in mid-November and have since fallen to just below 4.5% will help the housing market continue to grow at a modest clip as we enter the new year.”

Due to the partial government shutdown, there was no new Census/HUD figures released on housing starts and permits.

NAHB estimates that the December government data would show that single-family starts ended the year at 876,000 units. That is  a 3% gain over the 2017 total of 848,900. However, the slowdown in sales during the fourth quarter of 2018 has left new home inventories elevated in some markets.

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as good, fair or poor.

The survey also asks builders to rate traffic of prospective buyers as high to very high, average or low to very low. Scores for each component are then used to calculate a seasonally adjusted index. Any number over 50 indicates that more builders view conditions as good than poor.

All the HMI indices posted gains in January. The index measuring current sales conditions rose two points to 63. The component gauging expectations in the next six months increased three points to 64, and the metric charting buyer traffic edged up one point to 44.