Market Update: Builders Are Feeling Confident About the Housing Market

Blog posted On March 18, 2024

Mortgage rates trended higher last week thanks to a hotter-than-expected inflation report. But it’s a new week! And so far, we’re off to a strong start for housing news. This morning, the National Association of Home Builders (NAHB) released its housing market sentiment index for the month of March. It showed that builders think the housing market is in a much better place than it was this time last year.

Silver linings in last week’s rate movement

The consumer price index is the most popular gauge of inflation levels. It has also been one of the more volatile reports over the past couple of years. If the consumer price index revealed that inflation was hotter than expected, it often caused rates to jump higher. Last week was no exception; the consumer price index came in slightly above expectations, and rates trended higher. HOWEVER, we didn’t see as big of a rate jump as we expected. This could be a good sign that the markets are becoming more resilient to inflation data because they are confident it will continue to cool in the broad trend.

Builder confidence is HIGH

This morning, we got news from homebuilders about the state of the housing market from their perspective. While experts expected their confidence to still be in negative territory, the index surprisingly jumped to a level of 51. Any reading above 50 is considered positive. Not only is this the highest level of confidence in eight months, but it is much higher than it was this time last year (a level of 44). In fact, all three of the index’s components exceeded their levels from March 2023. 

As seen in the table, builders are much more hopeful about the current/future state of the market than they were last year. This could be a good sign that they predict rates to trend lower and sales to pick up soon. "Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year," NAHB Chairman Carl Harris said in a statement.

We’ll see how existing sales are holding up later this week with the February report (scheduled for release on Thursday).

Let us know if you have any questions about the market happenings!

Sources: Bloomberg, NAHB, Mortgage News Daily