Homebuilding sentiment rises in January for the first time in a year, thanks to low mortgage rates

Construction sentiment in the single-family home market showed a surprise gain in January, growing for the first time in 12 straight months. Economists had predicted a smaller decline.

Sentiment rose 4 points to 35 on the National Association of Home Builders/Wells Fargo Housing Market Index. Anything below 50 is still considered negative. The metric stood at 83 in January 2022.

“It seems that the lowest point for the construction sentiment in this cycle was recorded in December, even if the majority of construction workers continue to use many incentives, including price reductions, it encourages sales,” said Jerry Konter, chairman of the NAHB and a builder from Savannah, Georgia. “Elevated construction sentiment means that the low cycle for permits and starts is likely to be imminent, and a recovery for home construction may take place later in 2023.”

Buildings are being built in Tucson, Arizona, US, on Tuesday, Feb. 22, 2022. Sales of new U.S. homes fell in January after sales slowed at the end of 2021, suggesting a jump in mortgage rates may be starting to curb demand. .

Rebecca Noble | Bloomberg | Getty Images

All three parts of the index were added in January: current sales rose 4 points to 40, expected sales in the next six months rose 2 points to 37, and sales sales rose 3 points to 23.

Builders and buyers are likely to respond to the recent drop in mortgage rates. The average contract interest rate on a 30-year fixed mortgage last peaked at 7.37% at the end of October, according to Mortgage News Daily. It then fell throughout December and stood at 6.17% on Tuesday.

“While the NAHB sees a decline in single-family starts this year compared to 2022, it looks like a turnaround for homes lies ahead,” said Robert Dietz, the chief economist of the NAHB. “In the coming quarters, single-family home improvement will emerge from cyclical lows as mortgages are expected to decrease and housing affordability will improve.”

The latest data shows an increase in mortgage demand

Dietz said that there is still a national housing shortage of 1.5 million units and said that improving capacity should increase demand.

A mortgage application form to buy a home that was the highest level last week, according to the Mortgage Bankers Association. Unfortunately, the number of new listings on the market has dropped from last year.

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