Builder Confidence Improved in January

Washington, DC, January 18, 2023--A modest drop in interest rates helped to end a string of 12 straight monthly declines in builder confidence levels, reports the National Association of Home Builders (NAHB).

However, "sentiment remains in bearish territory as builders continue to grapple with elevated construction costs, building material supply chain disruptions and challenging affordability conditions," NAHB notes.

Builder confidence in the market for newly built single-family homes in January rose four points to 35, according to the NAHB/Wells Fargo Housing Market Index (HMI) released today. Any number over 50 indicates that more builders view conditions as good than poor.

“While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” says NAHB's chief economist, Robert Dietz. “In the coming quarters, single-family homebuilding will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability. Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units.”

All three HMI indices posted gains for the first time since December 2021. The HMI index gauging current sales conditions in January rose four points to 40, the component charting sales expectations in the next six months increased two points to 37, and the gauge measuring traffic of prospective buyers increased three points to 23.

However, the three-month moving averages for regional HMI scores fell four points in the Northeast to 33 and two points in the Midwest to 32.