The numbers: A lack of listings on the resale housing market is boosting demand for new construction, which is lifting home-builder confidence.
The National Association of Home Builders (NAHB) monthly confidence index rose one point to 45 in April, the trade group said on Monday.
This is the fourth month in a row that sentiment has improved among builders. The slight rise in confidence matched expectations on Wall Street.
The March reading of 45 was the strongest since September 2022. A year ago, the index stood at 77.
Builders were optimistic about the future as buyers contend with a low number of homes on the market. Home sellers are feeling trapped and unwilling to give up their ultralow mortgage rates.
Builders are not feeling the same constraints, giving them room to offer various enticements to lure eager buyers.
Key details: The three gauges that underpin the overall builder-confidence index were mixed.
- The gauge that marks current sales conditions rose by 2 points.
- The component that assesses sales expectations for the next six months rose by 3 points.
- The gauge that measures traffic of prospective buyers remained unchanged.
Builders in all four U.S. regions reported an increase in confidence, the NAHB said.
Builders are cutting home prices to attract buyers as one of their tactics, the NAHB said, with 30% saying they dropped prices in April. That was down from 31% in March.
The average size of the price reduction was 6% in April.
Big picture: It’s home builders’ moment to shine — and they’re very happy about it.
Home sellers are feeling stuck due to their own ultralow mortgage rates and a market that may force them to cut prices.
But rates are also inching downward, making mortgages less expensive for buyers and boosting demand.
As one of the few players to add to the housing stock, builders are feeling optimistic about their business. The home-builder exchange-traded fund is up nearly 10% year to date.
What the NAHB said: “Currently, one-third of the housing inventory is new construction, compared to the historical norms of a little more than 10%,” Robert Dietz, chief economist at the NAHB, said in a statement.
Dietz added that while lending conditions are tight for home builders, “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.”
Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.578%
rose above 3.55% on Monday morning.
The SPDR S&P Homebuilders ETF
XHB,
+1.74%
traded higher during the morning session, along with big home-builder stocks like D.R. Horton Inc.
DHI,
+2.71%,
KB Home
KBH,
+2.29%
and Lennar Corp.
LEN,
+3.03%.
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