Expert notes more buyers may enter the market this year
US homebuilders are feeling increasingly optimistic, with a six-month high for sentiment in February. According to a Bloomberg report, this surge in confidence comes as buyers seize the opportunity presented by declining mortgage rates, which have eased from their October highs.
According to data released by the National Association of Home Builders (NAHB) in collaboration with Wells Fargo, the gauge of housing market conditions climbed by four points to reach 48 this month, surpassing the median estimate of 46 in a Bloomberg survey of economists.
The rebound in builder sentiment started towards the end of last year, coinciding with the descent of mortgage rates below 7% by December. While there is an increase in borrowing costs, this has not undermined the budding recovery in the new-homes market.
“While mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year,” Alicia Huey, chair of the NAHB, said in a statement.
Notably, the NAHB’s measure of expected sales rose by three points, accompanied by positive shifts in gauges for prospective buyer traffic and current sales.
Geographically, builder sentiment improved across all four US regions, with particularly robust gains observed in the West and Northeast. The ongoing dip in mortgage rates has translated into fewer builders resorting to price reductions as a means to attract customers. In February, only 25% of builders reported price cuts, down from 31% in the previous month, while the average price reduction has plateaued at 6% for eight months. Concurrently, the proportion of builders offering incentives decreased to 58% in February, marking the lowest figure since August.
Looking ahead, the NAHB anticipates a 5% increase in single-family starts this year, as outlined by NAHB chief economist Robert Dietz. The federal government is scheduled to release January housing starts data on Friday, offering further insights into the trajectory of the housing market.
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