WASHINGTON – Builder confidence in the market for newly built single-family homes remained unchanged in April from the previous month when it hit its highest level since July 2023, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
The builder confidence index remains at 51, breaking a four-month period of gains. The HMI, nonetheless, remains above the key breakeven point of 50. At the same time mortgage rates have hovered close to 7% over the past month and the latest inflation data failed to show improvement during the first quarter of 2024.
“April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed,” said NAHB Chief Economist Robert Dietz. “With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year, and that mortgage rates will moderate in the second half of 2024.”
The April HMI survey also revealed that 22% of builders cut home prices this month, down from 24% in March and 36% in December 2023. However, the average price reduction in April held steady at 6% for the 10th straight month. Meanwhile, the use of sales incentives ticked down to 57% in April from a reading of 60% in March.
“With many frustrated buyers back on the fence waiting for interest rates to fall, policymakers can help ease affordability challenges by reducing inefficient regulatory rules that raise housing costs and limit supply,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan.
Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index charting current sales conditions in April increased one point to 57 and the component gauging traffic of prospective buyers also edged one point higher to 35. The component measuring sales expectations in the next six months fell two points to 60.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased four points to 63, the Midwest gained five points to 46, the South rose one point to 51 and the West registered a four-point gain to 47.
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