Builder confidence in the market for newly built, single-family homes climbed three points to 51 in March, according to the National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest level since July 2023 and marks the fourth consecutive monthly gain for the index. It is also the first time that the sentiment level has surpassed the breakeven point of 50 since last July.
Key points
- With mortgage rates below 7% since mid-December per Freddie Mac, more builders are cutting back on reducing home prices to boost sales.
- In March, 24% of builders reported cutting home prices, down from 36% in December 2023 and the lowest share since July 2023.
- The average price reduction in March held steady at 6% for the ninth straight month.
- The use of sales incentives is holding firm; the share of builders offering some form of incentive in March was 60%, and this has remained between 58% and 62% since last September.
Notable quotes
“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,” says NAHB Chairman Carl Harris. “But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”
“With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market,” says NAHB Chief Economist Robert Dietz. “However, as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber.”
