NAHB Index Shows Turning Point for Housing is Near

Despite forecasting a decline for single-family starts this year compared to 2022, National Association of Homebuilders’ (NAHB) chief economist Robert Dietz said a turning point for housing appears to lie ahead.

NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga., said it also appears that 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.

The NAHB/Wells Fargo Housing Market Index (HMI) – which defines builder confidence in the market for newly-built, single-family homes – in January rose four points to 35 due to a modest drop in interest rates.

The reading ended a string of 12 straight monthly declines in builder confidence levels.

The report gauged current sales conditions, sales expectations, and traffic of prospective buyers, and all three rose in one month for the first time since December 2021.

Cycle Lows for Permits, Starts Likely Near

The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023, NAHB said.

“In the coming quarters, single-family home building will rise off cycle lows as mortgage rates are expected to trend lower and boost housing affordability,” Dietz said in prepared remarks.

“Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units.”

Sentiment overall remains in bearish territory, NAHB said, as builders continue to grapple with elevated construction costs, building material supply chain disruptions, and challenging affordability conditions.