Homebuilder confidence surged in January as mortgage rates continued to trend lower, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Wednesday.
Builder confidence in the market for newly built single-family homes surpassed market expectations, climbing seven points to 44 on the index. The optimism comes as mortgage rates begin to fall and data points to an improving economy heading into 2024.
This marks the second consecutive monthly increase in builder confidence.
Lower interest rates have improved housing affordability and brought some buyers back into the market after being sidelined by higher borrowing costs, said Alicia Huey, NAHB Chairman.
“Single-family starts are expected to grow in 2024, adding much needed inventory to the market,” Huey said. “However, builders will face growing challenges with building material cost and availability, as well as lot supply.”
While mortgage rates have climbed slightly over the past couple of weeks, the average rate for a 30-year fixed-rate loan is more than a full percentage point lower than last year’s high of 7.79% seen at the end of October. The average rate is currently hovering around 6.6%, according to Freddie Mac.
The monthly builder index looks at current sales, buyer traffic and the outlook for sales of new-construction homes over the next six months.
This is a developing story and will be updated.
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