Homes under construction in Tucson, Arizona, US, Tuesday, February 22, 2022 US new home sales declined in January after a surge in purchases in late 2021, indicating that a hike in mortgage rates may be starting to dampen demand. .
Rebecca Noble | Bloomberg | Getty Images
Builder sentiment in the individual home market showed an unexpected rise in January, rising for the first time in 12 straight months. Economists had forecast a slight decline.
Sentiment rose four points to 35 on the National Home Builders Association/Wells Fargo Housing Market Index. Anything below 50 is still considered negative mood. In January 2022, this figure was 83.
“It appears that the lowest point in builder sentiment this cycle was recorded in December, even as many builders continue to use various incentives, including price cuts, to boost sales,” said Jerry Konter, NAHB chairman and home builder from Savannah. Georgia. “The rise in builder sentiment also means that cyclical lows for permits and start-ups are likely close and a housing recovery could start later in 2023.”
All three components of the index showed gains in January, with current selling conditions up four points to 40, sales expectations in the next six months up two points to 37, and buying traffic up three points to 23.
Both developers and consumers are likely reacting to the recent fall in mortgage rates. The average interest rate on a 30-year fixed mortgage contract last peaked at 7.37% at the end of October, according to Mortgage News Daily. It then fell during December and stood at 6.17% as of Tuesday.
“While the NAHB is forecasting a decline in new homes per household this year compared to 2022, it appears that the turning point for housing is yet to come,” said Robert Dietz, chief economist at the NAHB. “In the coming quarters, single-family home construction will rise from cycle lows as mortgage rates are expected to decline and increase housing affordability.”
Dietz noted that the country still has a structural housing shortfall of 1.5 million units and said that increased affordability should boost demand.
According to the Mortgage Bankers Association, mortgage applications to buy a home have skyrocketed in the past week. Unfortunately, the number of new offerings on the market has dropped dramatically compared to last year.