Stacks of bricks in front of a house under construction in the CastleRock Communities Sunfield housing development in Buda, Texas, on Wednesday, May 15, 2021.
Sergio Flores | Bloomberg | Getty Images
Builder sentiment in the new-build home market rose for the fourth straight month in April as supply of existing homes for sale remains tight.
The National Association of Home Builders/Wells Fargo housing market index rose to 45 in April, up 1 point. Anything under 50 is considered negative.
The reading is the highest since September. The index stood at 77 in April 2022.
Builders cited a lack of supply in the resale market in the report, giving them an unusually strong advantage. New listings of existing homes are down about 25% year-on-year.
Slightly lower mortgage rates are also supporting demand – although rates are still higher than a year ago.
“Builders are finding that a further decline in mortgage rates below 6% will price in more housing demand,” said Alicia Huey, NAHB chair and a home builder and developer from Birmingham, Alabama. “Nevertheless, the industry continues to be plagued by building material problems, including lack of access to electrical transformers.”
The index consists of three components. Current sales conditions rose 2 points to 51.
Meanwhile, six-month sales expectations rose 3 points to 50. It was the first time since June, when mortgage rates really shot up, that both indicators were positive.
However, buyer traffic remained flat at 31. It was the first time it hasn’t improved this year.
Builders said a third of the housing stock is new construction, compared to historical norms of about 10%. Concerns had grown that homebuilders could face more problems with construction loans following recent regional bank collapses.
But the bevy of new builds suggests that’s not the case.
“While AD&C loan conditions are severe, there is no significant evidence to date that pressures on the regional banking system have worsened this lending environment for builders and real estate developers,” said Robert Dietz, NAHB’s chief economist.
Sales incentives from homebuilders, including mortgage rate buybacks, have been successful in stimulating demand in recent months. However, the proportion of homebuilders cutting house prices is still falling.
Just under a third of home builders reported price cuts in April, down from 35% at the end of last year. The average price drop in April was 6%.
The proportion of builders using incentives increased slightly from 58% in March to 59% in April. It was still lower than the December reading of 62%.
Regionally, homebuilder sentiment in the Northeast rose 4 points on the three-month moving average to 46. In the Midwest, it rose 2 points to 37.
In the South, it rose 4 points to 49. In the West, it rose 4 points to 38.