U.S. builder confidence bounces back, breaking a 12-month losing streak
By Aarthi Swaminathan
The home-builder confidence index rose to 35 in January, signaling an improvement in builder sentiment.
The numbers: The National Association of Home Builders' (NAHB) monthly confidence index rose 4 points to 35 in January, the trade group said on Wednesday.
Economists polled by The Wall Street Journal expected the index to fall to 30.
A drop in mortgage rates boosted buyer demand. The rise in confidence reverses 12 months of straight drops in builder sentiment.
A year ago, the index stood at 83.
Key details: All three gauges that underpin the overall builder-confidence index rose for the first time since December 2021.
Builder sentiment improved in the west by 1 point, the NAHB said, while the south remained unchanged. Sentiment continues to drop in the midwest and northeast.
Big picture: Last month, builders said they saw a light at the end of the tunnel.
A drop in mortgage rates is reigniting the real-estate sector. Mortgage demand surged 28% in early January, according to a separate report by the Mortgage Bankers' Association.
What the NAHB said: "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," Jerry Konter, chairman of the NAHB and a home builder and developer from Savannah, Ga., said in a statement.
"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," he added.
"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," Robert Dietz, chief economist at the NAHB, said in a statement.
"Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units," Dietz added.
Market reaction: The yield on the 10-year Treasury note rose fell below 3.4% on Wednesday morning.
While the SPDR S&P Homebuilders ETF (XHB) traded slightly lower during the morning session, big home builder stocks like D.R. Horton Inc (DHI), Toll Brothers (TOL), Lennar (LEN), and K.B. Home (KBH) were mixed.
-Aarthi Swaminathan
(END) Dow Jones Newswires
January 18, 2023 10:05 ET (15:05 GMT)
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