Outlook Good? Builders More Confident in Single-Family Homes

With recent mortgage rates under 7%, builder confidence for newly-built single-family homes has increased seven points in January, according to the National Association of Home Builders.

“Mortgage rates have decreased by more than 110 basis points since late October per Freddie Mac,” according to the NAHB report. Lower interest rates have improved housing affordability and have opened opportunities for some buyers.

To boost sales, many home builders continue to reduce prices. This month, 31% of builders reported cutting home prices with the average price reduction being 6%. Additionally, 62% of builders provided sales incentives of all forms this month, which has been a steady number since October.

NAHB conducts a monthly survey to gauge builder perceptions of current single-family home sales and sales expectations, asking builders to rate their confidence as “good,” “fair” or “poor.” The survey also asks about the traffic of prospective buyers. Scores for each factor are used to calculate builder confidence, with any score above 50 indicating that more builders view conditions as good than poor.

This month, builder confidence increased seven points for a total of 44 points. Additionally, the index charting current sales conditions increased from 41 points to 48, the measurement of sales expectations in the next six months increased 12 points for a total of 57 and the component gauging traffic of prospective buyers increased five points for a total of 29.

Overall, these survey numbers indicate greater builder confidence for newly-built single-family homes as 2024 begins, which may open the door for more homebuying opportunities as the year continues.