After two months of declining homebuilder confidence, the National Association of Home Builders Housing Market Index gained two points in January with a reading of 58. Component readings of the HMI were also higher with homebuilder confidence in current market conditions rose two points to an index reading of 63. Homebuilder confidence in housing market conditions over the next six months rose three points to 64.
The index for buyer traffic in new housing developments rose one point to 44. While index readings above 50 indicate positive market conditions, the index reading for buyer traffic is typically lower than 50.
Lower Mortgage Rates Compel Home Buyers to Act
Falling mortgage rates contributed to the uptick in homebuilder confidence, but affordability continued to impact first-time and moderate-income home buyers. Robert Dietz, the NAHB chief economist, said: “Homebuilders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry level of the market.”
Analysts suggested that homebuilder could consider offering deeper discounts and incentives to buyers to increase sales of new homes. Homes not sold during November and December added to current inventories of new homes available, which provides homebuyers with more choices and less competition for homes.
Homebuilders Expect More Buyer Traffic
Lennar Corporation, a major homebuilder said that increased buyer traffic indicated that 2019 home sales would increase and that improving economic conditions were expected to improve housing market conditions and home sales in 2019.
Homebuilders expect to face continued headwinds in 2019; affordability tops the list, but relatively low inventories of homes in some areas dampen buyer enthusiasm. Single-family housing starts are also expected to be lower than the long-term yearly average. As economic conditions improve for would-be home buyers, a slim supply of homes and high home prices present obstacles to buyers.
Your trusted real estate agent is one of your best partners in your next home buying or selling transaction. Be sure to contact them to discuss market conditions in your area.