Homebuilding sentiment in US sees increase due to decreasing mortgage rates
Date
9/18/2024 4:57:04 AM
(MENAFN) In September, homebuilding sentiment in the US saw an uptick, driven largely by decreasing mortgage rates, according to the latest report released on Tuesday. The National Association of Home Builders/Wells Fargo Housing Market Index, which tracks sentiment among homebuilders, rose to 41 from 39 in August. Although this number remains below the neutral threshold of 50, indicating that the sentiment is still subdued overall, it suggests a slight improvement in builder confidence.
The increase in the index reflects a more optimistic outlook among builders for future new home sales, a shift that has been influenced by lower mortgage rates. This positive change marks the first time since May 2024 that builders have expressed a hopeful perspective on future sales. Carl Harris, the chair of the homebuilders' group, highlighted that while the decline in interest rates has fostered a more favorable view of future market conditions, the high cost of construction remains a significant concern.
Despite the improved sentiment, the high expenses associated with construction are still a barrier, which affects current enthusiasm for the housing market. Builders are also contending with increasing inventories of existing homes, which may dampen new home sales as the mortgage rate lock-in effect diminishes with the easing of rates.
Looking ahead, Robert Dietz, the association’s chief economist, anticipates that the Federal Reserve's expected monetary policy easing, which is projected to start on Wednesday, will contribute to lower mortgage interest rates. This, in turn, could reduce the cost of land development and home construction loans. Dietz emphasized that addressing the cost of construction is essential for tackling ongoing challenges related to housing affordability.
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