The National
Association of Homebuilders (NAHB) reported on Monday its housing market index
(HMI) jumped to 51 in March from an unrevised
February reading of 48. This
marked the fourth straight monthly improvement in builder
sentiment and represented the highest reading since July 2023 (56).
Economists had forecast the HMI to hold steady at 48.
A reading over
50 indicates more builders view conditions as good than poor.
All three major HMI components demonstrated increases in early March. The
component tracking current sales conditions surged 4 points to 56, the component
measuring traffic of prospective buyers rose 2 points to 34, and the component charting
sales expectations in the next six months also increased 2 points to 62.
Commenting on
the latest report, NAHB Chairman Carl Harris noted that buyer demand remains
brisk, and more consumers are expected to jump off the sidelines and into the
marketplace if mortgage rates continue to fall later this year. “But even
though there is strong pent-up demand, builders continue to face several
supply-side challenges, including a scarcity of buildable lots and skilled labour,
and new restrictive codes that continue to increase the cost of building homes,”
he added.
Meanwhile, NAHB
Chief Economist Robert Dietz said that with the Federal Reserve expected to
announce future rate cuts in the second half of 2024, lower financing costs
will draw many prospective buyers into the market. However, he warned that, as
home-building activity picks up, builders will likely grapple with rising
material prices, particularly for lumber.