Builder Confidence Increases for First Time in 12 Months as Mortgage Rates Fall

After 12 straight monthly declines, builder confidence in the market for newly built single-family homes rose four points in January to 35, signaling a possible rebound for home building in 2023, the National Association of Home Builders' Eye on Housing reports. In the coming quarters, single-family starts are expected to rise from cycle lows as slower mortgage rate hikes improve housing affordability and lead to a resurgence of buyer activity.

According to the most recent NAHB/Wells Fargo Housing Market Index (HMI), measures of current sales conditions, sales expectations, and buyer traffic all increased in January, though builders are still grappling with a housing deficit of 1.5 million units.

It is possible that the low point for builder sentiment in this cycle was registered in December, even as many builders continue to use a variety of incentives, including price reductions, to bolster sales. The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023.

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