According to the National Association of Home Builders, Homebuilder’s optimism improved in December as mortgage rates continued to fall.
Homebuilder confidence in the market for newly-built single-family homes rose for the first time in four months, climbing to 37 on the index, as mortgage rates and improved economic data reassured the builders moving into 2024.
The monthly index accounts for various factors like current sales, buyer traffic, and the outlook for sales of new-construction homes over the next six months.
Mortgage rates have moved drastically from late-October highs and have fallen below 7% for the first time since August. With the Federal Reserve hinting that it no longer plans on increasing interest rates and that rate cuts may be possible in 2024, mortgage prices have decreased since the current inflationary cycle began.
Alicia Huey, Chairman of the National Association of Home Builders said in a press release, “With mortgage rates down roughly 50 basis points over the past month, builders are reporting an uptick in traffic as some prospective buyers who previously felt priced out of the market are taking a second look.”
The Mortgage Bankers Association(MBA) also has an improved outlook after reportedly lower interest rates. The group’s Monday forecast indicated that existing home sales will increase by 6% and new home sales will increase by 10% in the next year. It also sees a 17% increase in the number of mortgage loans issued in 2024.
Robert Dietz, Chief Economist at NAHB, said in a statement, “The housing market appears to have passed peak mortgage rates for this cycle, and this should help to spur homebuyer demand in the coming months, with the HMI component measuring future sales expectations up six points in December.”
The MBA outlook also aligns with the data from HMI signalling that homebuilder sentiment for single-family housing sales for the next six months moved up 6 points to 45.
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Key Takeaways
- As mortgage rates continue to fall, homebuilders are optimistic for a brighter outlook in 2024.
- The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index jumped three points to reach 37 in December, the first time in four months.
- Mortgage Bankers Association(MBA) said lower mortgage Prices could increase existing home sales by 6% and new home sales by 10% in 2024.
