- Homebuilders are starting to get better at the market for newly built single-family homes.
- This is the third consecutive month of rising builders’ sentiment.
- However, sales expectations for the next six months have fallen and the industry is watching the recent turmoil in the banking system.
Mortgage rates are high and volatile, houses are still expensive and inflation is out of control, but even so, national builders are starting to feel better about their business.
The monthly indicator of builder confidence in the market for new single-family homes rose in March, although analysts had expected a fall. The National Home Builders Association/Wells Fargo Housing Market Index rose two points to 44. Anything above 50 is considered positive.
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This is the third consecutive month of rising builders’ sentiment. Last March, the index was 79 when mortgage rates were much lower.
“While builders continue to face persistently high construction costs and material supply chain disruptions, they continue to report strong pent-up demand as buyers wait for lower interest rates and turn more attention to a new home market due to a shortage of existing ones. inventory”, NAHB Chairman Alicia Huey, a custom builder from Birmingham, Alabama, said in a press release. “But given recent concerns about instability in the banking system and volatility in interest rates, builders are extremely unsure about the near and medium term.”
Of the index’s three components, current selling conditions are up two points to 49, while buying traffic is up three points to 31. However, sales expectations in the next six months have fallen one point to 47.
“While stress in the financial system has recently led to lower long-term interest rates, which will support housing demand in the coming weeks, the cost and availability of housing inventory remain a critical barrier to potential homebuyers,” said Robert Dietz, NAHB chief economist at New York. release.
The nation’s second-largest housing builder, Lennar, reported quarterly earnings on Tuesday that beat analysts’ expectations. Lennar Chairman Stuart Miller said in a press release: “Homebuyers are considering the possibility that today’s interest rate environment could become the new normal. Accordingly, the housing market continues to change as a growing number of households and families continue to drive demand amid chronic supply shortages. .”
And the supply side could also be another victim of banking stress. Dietz noted that 40% of builders in a March sentiment poll currently rate site accessibility as “poor.”
“A side effect of the pressure on regional banks, as well as the Fed’s continued tightening, will be further restrictions on Acquisition, Development, and Construction (AD&C) loans to builders across the country. When AD&C loan terms are tight, inventory shrinks. and adds an additional barrier to housing affordability,” Dietz said.
Regionally, on a three-month moving average, construction sentiment in the Northeast rose five points to 42. In the Midwest it rose one point to 34. In the South it rose five points to 45 and it rose four points in the West. . points up to 34.
Credit: www.cnbc.com /