NAHB: Builder Sentiment Remained Unchanged in April

Builder sentiment was flat in April, as mortgage rates stayed close to 7% over the previous month and the latest inflation statistics failed to demonstrate improvement in the first quarter of 2024.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) showed that builder confidence in the market for newly built single-family homes was 51 in April, unchanged from March.

This ends the index’s four-month winning streak, but it stays above the important breakeven figure of 50.

April’s flat rating implies that demand growth is possible, but purchasers are hesitant until they can better predict where interest rates will go.

With markets now responding to higher rates due to recent inflation readings, we still expect the Federal Reserve to announce future rate decreases later this year, and mortgage rates to moderate in the second half of 2024.

According to the April HMI survey, 22% of builders reduced home prices this month, down from 24% in March and 36% in December 2023.

For the tenth consecutive month, the average price drop in April remained at 6%.

Meanwhile, sales incentives were used at a rate of 57% in April, down from 60% in March.

The NAHB/Wells Fargo HMI, which is based on a monthly survey conducted by NAHB for over 35 years, assesses builder perceptions of current single-family home sales and sales projections for the next six months as “good,” “fair,” or “poor.” In addition, the study asks builders to rank prospective buyer traffic as “high to very high,” “average,” or “low to very low.”

The scores for each component are then used to produce a seasonally adjusted index, with any value more than 50 indicating that more builders consider conditions to be favorable rather than poor.

The HMI index recording current sales conditions in April gained one point to 57, while the component measuring prospective buyer traffic increased one point to 35.

The component gauging sales forecasts over the next six months dropped two points to 60.

Looking at the three-month moving averages for regional HMI scores, the Northeast grew by four points to 63, the Midwest by five points to 46, the South by one point to 51, and the West by four to 47.