US homebuilding sentiment rises in January with falling interest rates

By Ovunc Kutlu

ISTANBUL (AA) - Homebuilding sentiment in the US rose in January due to falling interest rates, according to a report released Wednesday.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) climbed seven points to 44.

"Lower interest rates improved housing affordability conditions this past month, bringing some buyers back into the market after being sidelined in the fall by higher borrowing costs," NAHB Chairman Alicia Huey said in a statement.

"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.

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.

NAHB chief economist Robert Dietz said mortgage rates have fallen by more than 110 basis points since late October.

"As home building expands in 2024, the market will see growing supply-side challenges in the form of higher prices and/or shortages of lumber, lots and labor," 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.