MortgageReal Estate

Homebuilder confidence climbs as economy strengthens

February marks second consecutive month of gains for all HMI indices

Declining mortgage rates partnered with a healthy economy contributed to homebuilder confidence increasing two points to 62 in February, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

Notably, February marked the second consecutive month of gains for all HMI indices. 

“Ongoing reduction in mortgage rates in recent weeks coupled with continued strength in the job market are helping to fuel builder sentiment,” NAHB Chairman Randy Noel said. “In the aftermath of the fall slowdown, many builders are reporting positive expectations for the spring selling season.”

NAHB Chief Economist Robert Dietz said builder confidence levels moved up in tandem with growing consumer confidence and falling interest rates.

“The five-point jump on the six-month sales expectation for the HMI is due to mortgage interest rates dropping from about 5% in November to 4.4% this week,” Dietz continued. “However, affordability remains a critical issue. Rising costs stemming from excessive regulations, a dearth of buildable lots, a persistent labor shortage and tariffs on lumber and other key building materials continue to make it increasingly difficult to produce housing at affordable price points.”

In February, the index measuring current sales conditions rose from 64 to 67 points, and buyer traffic moved forward from 44 to 48. Lastly, expectations over the next six months increased from 63 to 68 points. 

The three-month moving averages for regional HMI scores show the Northeast declined two points from 45 to 43 points, the South inch forward one point to 63 and the Midwest and West held steady at 52 and 67, respectively.

NOTE: The NAHB/Wells Fargo Housing Market Index gauges builder opinions of single-family home sales and expectations, asking for a rating of good, fair or poor. Builders are also asked to rate prospective buyer traffic from very low to very high. The scores are used to calculate a seasonally adjusted index with a rating of 50 or over indicating positive sentiment.

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