A Glimmer Of Hope: US Homebuyer Sentiment Steps Into Positive Territory Amid Tumultuous Housing Market
EDITOR'S NOTE: As the tempestuous currents of the US housing market continue to challenge buyers and builders alike, a beacon of hope shines through the storm. The National Association of Home Builders/Wells Fargo Housing Market Index, a critical measure of the single-family housing market's pulse, reports a noteworthy increase in May, buoyed by declining mortgage rates and constrained inventory. This surge in confidence, the first positive shift in nearly a year, suggests a cautious optimism stirring among homebuyers and builders, offering a glimmer of stability amidst the turbulent economic landscape.
Homebuyer sentiment exits negative territory in May for first time in nearly a year
Confidence among builders in the U.S. housing market increased more than expected in May as declining mortgage rates and limited inventory helped drive demand higher for new homes.
The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, rose five points to 50, the highest reading since July.
It marked the first time in nearly a year that the index pulled out of negative territory. Any reading above 50 is considered positive; prior to 2022, the gauge had not entered negative territory since 2012, excluding a brief – but steep – drop in May 2020.
Source: FOX Business
"New home construction is taking on an increased role in the marketplace because many homeowners with loans well below current mortgage rates are electing to stay put, and this is keeping the supply of existing homes at a very low level," said Alicia Huey, NAHB chair and a custom home builder and developer from Birmingham, Alabama.
Still, the gauge still indicates the housing market is in a slump.
The index has fallen to about half of what it was just one year ago, when it stood at 81, although it has increased from a low of 31. It peaked at a 35-year high of 90 in November 2020, buoyed by record-low interest rates at the same time that American homebuyers – flush with cash and eager for more space during the pandemic – started flocking to the suburbs.
Source: FOX Business
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten policy and slow the economy.
Policymakers already lifted the benchmark federal funds rate 10 straight times – well into restrictive territory – as they try to crush stubborn inflation that is still running about double the pre-pandemic average.
Demand has shown early signs of returning as mortgage rates fall from a record high of 7.08% in November.
The average rate for a 30-year fixed mortgage dropped to 6.35% last week, according to data from mortgage lender Freddie Mac. However, that remains significantly higher than just one year ago, when rates hovered around 5%.
Limited inventory has also bolstered demand this month. A recent report from Realtor.com showed that the number of available homes on the market in March was down more than 50% from the typical amount before the pandemic began.
"Lack of existing inventory continues to drive buyers to new construction," said Robert Dietz, NAHB chief economist. "In March, 33% of homes listed for sale were new homes in various stages of construction. That share from 2000-2019 was a 12.7% average. With limited available housing inventory, new construction will continue to be a significant part of prospective buyers’ search in the quarters ahead."
Originally published by: Megan Henney on FOX Business
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