NAHB Housing Market Index Finally Rises After Twelve Consecutive Monthly Falls

NAHB housing market index rose to 35 in January (consensus 31) from 31 in December which was the lowest level since mid-2012 with the exception of the spring of 2020.  Builder sentiment had declined every month in 2022. Earlier today the weekly MBA Mortgage Applications Index jumped 27.9% with purchase applications rising 25% and refinancing applications increasing 34%, perhaps we are seeing some positive real estate activity. While a 30-year fixed is down to 6.42% from a peak of 7.16% according to the MBA it is still a long way from under 3% at the start of the year. Inflation, though softer, not far from 40-year highs striking out affordability for many.

United States NAHB Housing Market Index

In December more than 61% of the builders in the survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions. We have no update on that proportion for January.

More housing data will be released tomorrow in the form of the latest Housing Starts and Building Permits reports.

US NAHB home builder sentiment January 2023

  • NAHB HMI 35 vs 31 expected Prior was 31
  • Current single-family home sales 40 vs 36 prior
  • Sales over the next six months 37 vs 35 prior
  • Index of prospective buyers 23 vs 20 prior

“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.”

Regional HMI Scores

Looking at the three-month moving averages for regional HMI scores,

  • Northeast fell four points to 33,
  • Midwest dropped two points to 32,
  • South steady at 36
  • West posted a one-point gain to 27.

Regionally, the sentiment was strongest in the West where prices are highest. 

“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, single-family 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.”

Home Builder Earnings Reports:

About National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI)

Based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

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.

Source: NAHB

From The TradersCommunity News Desk