US Builder Confidence Inches Higher in January

Builder sentiment in the market for newly built single-family homes rose in January, according to the NAHB/Wells Fargo Housing Market Index (HMI) released Thursday. The index increased by 1 point from December, reaching a reading of 47.

Builders are facing continued challenges for housing demand in the near-term, NAHB said, with mortgage rates up from near 6.1% in late September to above 6.9% currently. Land is expensive and financing for private builders remains costly.

The survey also revealed that 30% of builders reduced home prices in January, a level that has remained steady between 30% and 33% since last July. The average price reduction was 5%, unchanged from December. Additionally, 61% of builders used sales incentives, a figure that has ranged between 60% and 64% since last June.

In January, the HMI index measuring current sales conditions rose 3 points to 51, while the index tracking traffic of prospective buyers gained 2 points, reaching 33. However, the component gauging sales expectations for the next six months fell 6 points to 60, driven by the elevated interest rate environment. Despite this, the future sales component remains the highest of the three sub-indices and continues to stand well above the breakeven level of 50.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased 5 points to 60, the Midwest moved 1 point higher to 47, the South posted a 1-point gain to 46, and the West fell 1 point to 40.