Home builders remain “cautiously optimistic” in April as limited resale inventory helps increase demand in the new-home market. Optimism is clouded by ongoing building material issues, according to the NAHB/Wells Fargo Housing Market Index (HMI).
Builder confidence in the market for newly-built single-family homes in April rose one point to 45, according to the HMI.
“For the fourth straight month, builder confidence has increased due to a lack of resale inventory despite elevated interest rates,” says NAHB chairman Alicia Huey. “Builders note that additional declines in mortgage rates, to below 6%, will price-in further demand for housing. Nonetheless, the industry continues to be plagued by building material issues, including lack of access to electrical transformer equipment.”
The share of builders reducing home prices continued to trend down in April. Thirty percent of respondents to the HMI survey said they reduced prices in April compared with 31% in March and February and 35% as recently as December. The average price reduction in April was 6%. The share of builders using incentives to bolster sales edged up 1 percentage point to 59% in April.
“Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10%,” says NAHB chief economist Robert Dietz. “More buyers looking at new homes, along with the use of sales incentives, have supported new-home sales since the start of 2023. And while AD&C loan conditions are tight, there is not significant evidence thus far that pressure on the regional bank system has made this lending environment for builders and land developers worse.”
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months and asks builders to rate traffic of prospective buyers. Index scores with a number over 50 indicates that more builders view conditions as good than poor.
The HMI index gauging current sales in April rose two points to 51, and the component tracking sales expectations in the next six months increased three points to 50. April marks the first month since June 2022 where both the sales conditions and sales expectations indices were at or above 50.
The gauge measuring traffic of prospective buyers remained unchanged at 31, the first time the traffic component failed to improve in 2023.
Looking at the three-month moving averages for regional HMI scores, the Northeast rose four points to 46, the Midwest increased two points to 37, the South increased four points to 49, and the West moved four points higher to 38.
This story originally appeared on Livabl’s sister site BUILDER Online.
