Home builder sentiment improves for the first time in a year

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Home builder sentiment improves for the first time in a year
Credit: © Reuters.

By Liz Moyer

Investing.com -- Home builders were getting a boost from improving sentiment on the outlook for the industry as mortgage rates cool from their October peak

A closely-watched index of home builders rose in January for the first time in a year. The National Association of Home Builders /Wells Fargo Housing Market Index was 35, according to data released Wednesday. That is up four points from the prior month, beating expectations.

While a reading of 35 is still negative – anything below 50 is – it is the highest reading since October, when the average interest rate on a 30-year fixed mortgage peaked over 7%. It is now back down to around 6.23%.

Shares of KB Home (NYSE: KBH ) rose 1.7% on Wednesday. Shares of DR Horton Inc (NYSE: DHI ) were up 0.8%, and PulteGroup Inc (NYSE: PHM ) shares rose 0.7%.

The index measures builder confidence in the market for newly built single-family homes. It dipped to 31 in December. At this time last year, it was reading 83.

NAHB Chair Jerry Konter, who is a developer in Savannah, Georgia, said in a press release that many home builders continue to use incentives such as price reductions to improve sales. The boost in 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,” he said.

The index measuring current sales condition rose four points to 40, while sales expectations for the next six months rose two points to 37. The buyer traffic index rose three points, to 23.

NAHB is still forecasting a drop in single-family starts this year compared to 2022, the statement said.

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