The latest figures are in…
Builder sentiment in the housing market remained unchanged in April, reflecting hesitancy among potential homebuyers who are cautious about fluctuating mortgage rates and uncertain economic forecasts.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) held steady at 51 this month, breaking a four-month streak of gains. Nonetheless, the index stayed above the key breakeven point of 50.
“With many frustrated buyers back on the fence waiting for interest rates to fall, policymakers can help ease affordability challenges by reducing inefficient regulatory rules that raise housing costs and limit supply,” said NAHB chairman Carl Harris.
While the steady reading suggests underlying demand, potential buyers are taking a wait-and-see approach, according to NAHB chief economist Robert Dietz.
“April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed,” Dietz said in the report. “With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year and that mortgage rates will moderate in the second half of 2024.”
The report also showed that 22% of builders reported cutting home prices, a slight decrease from 24% in March and significantly lower than the 36% reported in December 2023. The average price reduction has remained consistent at 6% for 10 consecutive months, while the use of sales incentives dropped slightly to 57% from 60% in March.
Read more: Could the Fed decide not to cut interest rates this year?
The HMI also measures other aspects of the housing market, such as current sales conditions, which saw a slight increase in April, moving up one point to 57. The traffic of prospective buyers index also increased marginally by one point to 35. However, the component measuring sales expectations over the next six months fell by two points to 60, reflecting builders’ cautious optimism.
Regionally, the three-month moving averages for HMI scores varied, with the Northeast seeing a four-point increase to 63 and the Midwest gaining five points to 46. The South experienced a modest rise of one point to 51, while the West reported a four-point increase to 47, suggesting regional disparities in how markets are responding to broader economic conditions.
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