U. S. housing construction market to grow in 2023
2023.01.18 11:15
U. S. housing construction market to grow in 2023
By Tiffany Smith
Budrigannews.com – Even though construction firms’ sentiment remains decidedly bearish, confidence among U.S. single-family homebuilders improved in January for the first time in more than a year. This could indicate that the housing slump may have reached its lowest point.
On Wednesday, the National Association of Home Builders reported that its NAHB/Wells Fargo Housing Market index increased by four points to 35 this month, exceeding the median view of 31 and matching the high end of estimates provided by 27 economists in a Reuters poll. A reading above 50 indicates that a greater number of builders view the situation favorably.
The index had fallen to its lowest level since June 2012, with the exception of a brief dip in the spring of 2020 when the coronavirus pandemic began. The uptick in January ended a record-long streak of 12 consecutive monthly declines.
According to NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Georgia, “It appears the low point for builder sentiment in this cycle was registered in December, even as many builders continue to use a variety of incentives, including price reductions, to bolster sales.”
Additionally, the rise in builder sentiment indicates that cycle lows for permits and starts are likely to be reached soon, and a rebound in home construction may begin later in 2023.
The Federal Reserve’s aggressive interest rate hikes have so far had the greatest impact on the housing market, with the goal of reducing inflation, which is still too high.
In October, the highest interest rate on the most common type of home loan in the United States was over 7%, and sales of new and used homes fell by more than 35% from January to November.
The benchmark policy rate set by the U.S. central bank has increased to a range of 4.25 percent to 4.50 percent since March. At its meeting last month, it said that it would keep raising rates this year until it is sure that inflation is going down from the four-decade highs reached in mid-2022 back to its goal of 2% per year.
However, investors betting that the Fed is nearing the end of its rate hikes have driven down yields on the Treasury securities that determine home borrowing costs, resulting in a recent decrease in mortgage rates. The contract rate on a 30-year fixed-rate mortgage fell to its lowest level since September last week, and loan application volumes increased, which could be another sign that the housing slump has bottomed out.
The NAHB reported that sentiment improved in all four regions, and the index that tracks expectations for future sales rose for a second month. Additionally, its gauge of buyer traffic increased.
