As mortgage rates continue to drop, the housing market appears to be stabilizing and showing signs of improvement. According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence rose in February to 42, the strongest reading since September of last year. The Federal Reserve’s tightening of monetary policy conditions and forecasts for the housing market have passed its peak mortgage rates for this cycle, despite the ongoing volatility of mortgage rates and housing costs.
The HMI index rose 7 points in February, indicating that the housing market may be turning a corner. The drop in mortgage rates has boosted sentiment, despite builders continuing to deal with high construction costs and supply chain delays. Of the builders surveyed, 31% reduced their home prices in February, down from 35% in December and 36% in November. Additionally, 80% of builders anticipate that hesitant buyers, who are holding back in expectation of lower mortgage rates and prices, will impact their business in 2023.
Alicia Huey, chairman of the NAHB and a home builder and developer from Birmingham, Ala., said in a statement that the nation continues to face a sizeable housing shortage. She called on lawmakers to help reduce the cost of developing lots and building homes “via regulatory reform” in order to construct more affordable and attainable housing.
Overall, the housing market should achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.
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2. “Are These Home Builder Approaching Possible Buy Points?” MarketBeat, 10 Feb. 2023, https://www.marketbeat.com/originals/are-these-home-builder-approaching-possible-buy-points/
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