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.
(END) Dow Jones Newswires
January 18, 2023 10:05 ET (15:05 GMT)
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