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Home builders are growing more confident in the housing market amid softer mortgage rates and limited supply.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rose 3 points in March to 51, marking the fourth straight month of gains and the highest level since July 2023. Ta. 48’s.
The March statistics indicate that the sentiment level has exceeded 50 for the first time since July last year. A number above 50 indicates that more builders see conditions as better than worse.
The rise in builder sentiment reflects how many buyers are considering new construction due to a lack of supply in the existing home market. Investors are also hopeful that the U.S. Federal Reserve will cut interest rates by the end of the year, which will result in lower funding costs for potential buyers. The Fed is scheduled to make its next interest rate decision on Wednesday.
Mortgage rates have trended upward for most of this year, but the average rate on a 30-year fixed mortgage was 6.74% last week, down from 6.88% the week before, according to Freddie Mac.
read more: With mortgage rates hovering around 7%, is it a good time to buy a home?
“With the Fed expected to announce future rate cuts in the second half of 2024, lower funding costs will bring more potential buyers into the market,” said Robert Dietz, chief economist at NAHB. “However, as homebuilding activity picks up, builders will grapple with rising prices for materials, especially wood.”
Builders slightly reversed their home price reductions in March, with 24% of builders reporting they had reduced home prices, down from 36% in December and the lowest share since July.
On the other hand, usage of sales incentives remains steady. The percentage of builders offering some type of incentive was 60% in March, and has fluctuated between 58% and 62% since September last year.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.
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