Homebuilders are beginning to sound a new refrain.
Builder sentiment rose seven points this month, according to the National Association of Homebuilders/Wells Fargo Housing Market Index. While the outlook of the industry remained negative, it was the biggest positive jolt in the index since the start of the pandemic.
It was the second month of gains and the strongest reading since September, when the index slid for the 10th straight month.
There are still factors stressing homebuilders, including high construction costs and supply chain issues. But the staggering rise of mortgage rates since March appears to be easing, providing some hope the housing market may finally turn in the industry’s favor.
NAHB chief economist Robert Dietz suggested in a statement that the Federal Reserve’s continued tightening of monetary policy may not hurt mortgage rates — and therefore, builders — any further.
“While we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024,” Dietz said.
For builders, signs of stabilization are in the air. This month, 31 percent of builders reduced home prices, an improvement from 35 percent in December. The average price drop and the number of homes being offered with an incentive also declined, though the latter is still above 50 percent.
The NAHB/Wells Fargo index assesses the sentiment around the single-family housing market, as well as sales expectations for the next six months. All three components of the index improved in February; the components looking at current sales conditions and traffic of prospective buyers jumped six points, while the component for six-month sales expectations rose 11 points. All still remain below 50, meaning conditions are viewed negatively.
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