In a positive turn for the housing market, builder confidence has surged, with the NAHB/Wells Fargo Housing Market Index (HMI) reaching 55 in June-a five-point increase from the previous month. This is the first time in 11 months that sentiment levels have surpassed the midpoint of 50, indicating favorable market conditions for newly built single-family homes.

According to Alicia Huey, the NAHB Chairman, builders are cautiously optimistic due to the scarcity of existing home inventory and gradual improvements in supply chains. However, she highlighted the challenges faced by builders and developers in obtaining loans, which may lead to lower lot supplies as the industry aims to rebound from recent lows.

 
Robert Dietz, the NAHB Chief Economist, expressed confidence in the home building sector, stating, "A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year." Dietz also pointed out that the Federal Reserve is nearing the end of its tightening cycle, which is positive news for the future market conditions, including mortgage rates and financing costs.

Dietz also emphasized the importance of addressing supply chain issues, labor shortages, and regulatory policies to tackle inflation. He urged policymakers to focus on increasing the supply of affordable and attainable housing, both for sale and rent, as it plays a crucial role in curbing inflation.

The June HMI survey indicates that builders are gradually reducing sales incentives, demonstrating a growing optimism about demand for single-family homes. The share of builders reducing home prices dropped from 30% in April to 25% in June, with the average price reduction at 7%. Additionally, 56% of builders offered incentives to buyers in June, down from 62% in December 2022.

All three major HMI indices recorded gains in June, with the index for current sales conditions rising to 61, sales expectations for the next six months increasing to 62, and the gauge measuring prospective buyer traffic climbing to 37.

The positive trajectory in builder confidence and the housing market as a whole bodes well for economic growth, provided that supply chain challenges and regulatory hurdles are addressed to support the continued expansion of affordable housing.

https://www.nahb.org/news-and-economics/press-releases/2023/06/builder-confidence-moves-into-positive-territory-in-june