Builder confidence in the market for newly built single-family homes in January rose four points to 35, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The HMI index gauging current sales conditions in January rose four points to 40, the component charting sales expectations in the next six months increased two points to 37, and the gauge measuring traffic of prospective buyers increased three points to 23.
A modest drop in interest rates helped to end a string of 12 straight monthly declines in builder confidence levels, although sentiment remains in bearish territory as builders continue to grapple with elevated construction costs, building material supply chain disruptions and challenging affordability conditions.
Regional data
Looking at the three-month moving averages for regional HMI scores, the West registered a one-point gain to 27, the South held steady at 36, the Northeast fell four points to 33 and the Midwest dropped two points to 32.
NAHB's take on the data
"It appears the low point for builder sentiment in this cycle was registered in December, even as many builders continue to use a variety of incentives, including price reductions, to bolster sales," says NAHB Chairman Jerry Konter. "The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023."
"While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead," says NAHB Chief Economist Robert Dietz. "In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability. Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units."
