The NAHB Housing Market Index, the monthly survey of home builders' future expectations, rose 3 points this month to 37, representing a break from the 4-month downtrend before the release.
The rise in builder confidence may be explained by mortgage rates falling consecutively as of October, this has made buying a home more appealing to homebuyers and reduced the fear for homebuilders that they cannot sell a completed home. Mortgage prices stand at 6.38% and 6.95% for the 15 and 30-year fixed rate mortgage respectively, down from 7.03% and 7.79% in October.
Another potential driver of rising builder confidence may be that the inventories of existing homes are plummeting because homeowners do not want to sell as it would incur a higher mortgage rate. This means that the demand for new homes is rising as people are unable to purchase pre-existing homes which is consequentially pushing up home prices across the market.
However, one must note that the NAHB HMI has been in a consistent downtrend since November 2020, meaning one uptick is not enough to justify long-term trends that have not emerged yet. Additionally, a reading below 50 is seen as a negative outlook for this metric, meaning that although it rose by 3 points, it just means the homebuilders expect the future to be bad, but not as bad as before.
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