Homebuilder sentiment improved in January, jumping 7 points to 44 on the National Association of Home Builders monthly index. Anything below 50 is still considered negative. The index has now moved 10 points higher in the last two months.
Sentiment is now at the highest level since September.
The increase coincides with a big drop in mortgage interest rates from around 8% in mid-October to the 6% range in December. Builders point squarely to that, and the effect on affordability, for growing confidence.
Lower interest rates improved housing affordability conditions this past month. This brought some buyers back into the market after being sidelined in the fall by higher borrowing costs. Single-family starts are expected to grow in 2024. However, builders will face growing challenges with building material cost and availability, as well as lot supply.
Of the index’s three components, current sales conditions increased 7 points to 48, sales epectations in the next six months jumped 12 points to 57 and buyer traffic rose 5 points to 29.
Regionally, on a three-month moving average, builder confidence increased the most in the Northeast.