January homebuilder sentiment rises for first time in a year

Homes under construction in Tucson, Arizona, USA, on Tuesday, February 1. 22, 2022. Sales of new homes in the United States fell in January after a wave of purchases at the end of 2021, indicating that a rise in mortgage rates could begin to dampen demand.

Rebecca Noble | Bloomberg | Getty Images

Builder sentiment in the single-family home market posted an unexpected gain in January, rising for the first time in 12 straight months. Economists had predicted a slight decline.

Sentiment rose four points to 35 on the National Association of Home Builders/Wells Fargo Housing Market Index. Anything below 50 is still considered a negative sentiment. The metric was 83 in January 2022.

“It appears that the low point in automaker sentiment in this cycle was recorded in December, even as many automakers continue to use various incentives, including price cuts, to support sales,” said Jerry Konter. , NAHB president and home builder from Savannah, Georgia. “Rising builder sentiment also means cycle lows for permits and housing starts are likely near, and a rebound for homebuilding could be on the way later in 2023.”

All three components of the index posted gains in January: current selling conditions rose four points to 40, expectations to sell over the next six months rose two points to 37, and buyers rose three points to 23.

Both builders and consumers are likely reacting to the recent drop in mortgage rates. The average contractual interest rate on the 30-year fixed mortgage last peaked at 7.37% in late October, according to Mortgage News Daily. It then declined throughout December and stood at 6.17% on Tuesday.

“As the NAHB projects single-family housing starts to decline this year relative to 2022, it appears a turning point for housing is looming,” said NAHB chief economist Robert Dietz. “In the coming quarters, single-family home construction will rise above cycle lows as mortgage rates are expected to decline and increase housing affordability.”

Dietz noted that the country still has a structural housing deficit of 1.5 million units and said improving affordability should increase demand.

A measure of mortgage applications to buy a home rose sharply last week, according to the Mortgage Bankers Association. Unfortunately, the number of new listings on the market is down sharply from a year ago.

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