Builders remained cautiously optimistic in April as limited resale inventory helped to increase demand in the new home market even as the industry continues to grapple with building material issues.
Key points
- The NAHB/Wells Fargo Housing Market Index registered a one-point gain in April to 45 (anything under 50 is considered negative).
- Builders said just under one-third of housing inventory is new construction, compared with historical norms of around 10 percent.
- A lack of listings on the resale market is giving builders an edge.
Builder confidence in the market for newly built single-family homes in April rose one point to 45, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
The HMI survey shows that the share of builders reducing home prices continues trending down, as 30 percent said they reduced prices in April, compared to 31 percent in March and February, 35 percent in December and 36 percent in November. The average price reduction in April was 6 percent, the same as in February and March but lower than in December (8 percent). The share of builders using incentives to bolster sales has edged up from 57 percent in February, to 58 percent in March to now 59 percent in April, but it’s still lower than it was last December (62 percent).
NAHB’s take on the data
“For the fourth straight month, builder confidence has increased due to a lack of resale inventory despite elevated interest rates,” says NAHB Chairman Alicia Huey. “Builders note that additional declines in mortgage rates, to below 6 percent, will price-in further demand for housing. Nonetheless, the industry continues to be plagued by building material issues, including lack of access to electrical transformer equipment.”
“Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10 percent,” says NAHB Chief Economist Robert Dietz. “More buyers looking at new homes, along with the use of sales incentives, have supported new home sales since the start of 2023. And while AD&C loan conditions are tight, there is not significant evidence thus far that pressure on the regional bank system has made this lending environment for builders and land developers worse.”
Regional data
Regionally, on a three-month moving average, builder sentiment in the Northeast rose four points to 46. In the Midwest, it rose two points to 37. In the South, it increased four points to 49. In the West, it rose four points to 38.
