NAHB builder sentiment

The NAHB home builder index for January lifted by 7 pts m/o/m to 44. Though still under 50 it was 5 pts above expectations. The Present Situation was higher by 7 pts to 48 while the Expectations component jumped back above 50 for the first time since August to 57, up 12 pts m/o/m. Still in the doldrums though is bodies walking the floor of homes as Prospective Buyers Traffic was just 29, though up 5 pts from December.

It’s easier to understand why builder confidence rose and that was due to the drop in mortgage rates. According to Bankrate, the average 30 yr mortgage rate started December at about 7.5% and ended the month at 7% and which is where it stands as of yesterday. It peaked last year at around 8% at the very end of October.

Builders are still relying on discounting to drive sales. According to the NAHB, “In January, 31% of builders reported cutting home prices, down from 36% during the previous two months and the lowest rate since last August. The average price reduction in January remained at 6%, unchanged from the previous month. Meanwhile, 62% of builders provided sales incentives of all forms in January. This share has remained stable between 60% and 62% since October.”