VOL 2023 ISSUE 1

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VOL 2023 ISSUE 1



Builder Confidence Uptick Signals Optimism for Turning Point


New Home Sales Inch Higher but Market Weakness Remains

A modest drop in interest rates helped to end a string of 12 straight monthly declines in builder confidence levels , although sentiment remains in bearish territory as builders continue to grapple with elevated construction costs , building material supply chain disruptions and challenging affordability conditions . Builder confidence in the market for newly built single-family homes in January rose four points to 35 , according to the National Association of Home Builders ( NAHB )/ Wells Fargo Housing Market Index ( HMI ) released today . “ It appears the low point for builder sentiment in this cycle was registered in December , even as many builders continue to use a variety of incentives , including price reductions , to bolster sales ,” said NAHB Chairman Jerry Konter , a home builder and developer from Savannah , Ga . “ The rise in builder sentiment also means that cycle lows for permits and starts are likely near , and a rebound for home building could be underway later in 2023 .” “ While NAHB is forecasting a decline for single-family starts this year compared to 2022 , it appears a turning point for housing lies ahead ,” said NAHB Chief Economist Robert Dietz . “ In the coming quarters , singlefamily home building 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 .” Derived from a monthly survey that NAHB has been conducting for more than 35 years , the NAHB / Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “ good ,” “ fair ” or “ poor .” The survey also asks builders to rate traffic of prospective buyers as “ high to very high ,” “ average ” or “ low to very low .” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor . 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 . Looking at the three-month moving averages for regional HMI scores , the West registered a one-point gain to 27 , the South held steady at 36 , the Northeast fell four points to 33 and the Midwest dropped two points to 32 .
New Home Sales Inch Higher in December but Market Weakness Remains While new home sales posted a modest gain in December , elevated mortgage rates and higher construction costs continue to hinder housing affordability and put a damper on consumer demand . Sales of newly built , single-family homes in December increased 2.3 % to a 616,000 seasonally adjusted annual rate from a downwardly revised reading in November , according to newly released data by the U . S . Department of Housing and Urban Development and the U . S . Census Bureau . New home sales were down 16.4 % in 2022 compared to the previous year . “ Builder incentives and declining mortgage rates during the month of December helped push new home sales up for the month ,” said
Jerry Konter , chairman of the National Association of Home Builders ( NAHB ) and a home builder and developer from Savannah , Ga . “ However , because of higher construction costs and decreasing affordability , sales are down more than 25 % compared to a year ago .” “ In a further sign of decreasing housing affordability , even though the median home price is down for the second straight month , it is still up 7.8 % compared to last year ,” said Danushka Nanayakkara-Skillington , NAHB ’ s assistant vice president for forecasting and analysis . “ Elevated inventories are another concerning sign of a soft market .” A new home sale occurs when a sales contract is signed or a deposit is accepted . The home can be in any stage of construction : not yet started , under construction or completed . In addition to adjusting for seasonal effects , the December reading of 616,000 units is the number of homes that would sell if this pace continued for the next 12 months . New single-family home inventory remained elevated at a 9 months ’ supply ( of varying stages of construction ). A measure near a 6 months ’ supply is considered balanced . The count of homes available for sale , 461,000 , is up 18.5 % over last year . A year ago , there were just 33,000 completed , ready to occupy homes available for sale . By December 2022 , that number increased 115 % to 71,000 , reflecting flagging demand and more standing inventory due to lower sales . Completed , ready to occupy inventory however , remains just 15 % of total inventory . The median new home sale price in December was $ 442,100 , down 3.7 % from November , however , it is still up 7.8 % compared to last year due to higher construction costs .