US homebuilding sentiment rises in February for 3rd straight month

By Ovunc Kutlu

ISTANBUL (AA) - Homebuilding sentiment in the US rose in February for the third consecutive month, according to a report released Wednesday.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) climbed four points to 48 in February, from 44 in January, to mark its highest level since August 2023.

While above 50 is considered positive for the housing sector, the index measures sentiment among homebuilders and is considered an important indicator for housing investment and consumer spending on appliances and furnishings, which affect the overall economy.

"Buyer traffic is improving as even small declines in interest rates will produce a disproportionate positive response among likely home purchasers," NAHB Chairman Alicia Huey said in a statement. "And while mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year."

"Single-family starts are expected to grow in 2024, adding much needed inventory to the market. However, builders will face growing challenges with building material cost and availability, as well as lot supply," she added.

NAHB chief economist Robert Dietz said the association estimates single-family starts to rise around 5% this year, with future expectations of the Federal Reserve interest rate cuts in the latter half of 2024.

"But as builders break ground on more homes, lot availability is expected to be a growing concern, along with persistent labor shortages. And as a further reminder that the recovery will be bumpy as buyers remain sensitive to interest rate and construction cost changes, the 10-year Treasury rate is up more than 40 basis points since the beginning of the year," he said.

Even as mortgage rates have fallen below 7% in the past month, many builders continue to reduce prices to boost sales, according to the NAHB.