Homebuilders are more optimistic about the housing market as the decline in mortgage rates raises expectations of stronger demand from buyers.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rose 4 points to 48 in February, marking the third straight month of gains and the highest level since August 2023. 46.
The continued enthusiasm reflects the strength of the newly built housing market and expectations that mortgage rates will continue to decline, fueling buyer appetite.
“Buyer traffic is improving because even small drops in interest rates create a disproportionately positive response among homebuyers,” said NAHB President Alicia Huey, a Birmingham, Ala.-based custom home builder and developer.
“While mortgage rates are still high for many prospective buyers, if mortgage rates continue to decline this year, we expect many more buyers to enter the market due to high demand.”
Mortgage rates have eased from a peak of 8% last year, and more builders are cutting home prices to boost sales. In February, 25% of builders cut home prices, which fell to 31% in January and 36% in the last two months of 2023.
Meanwhile, the share of builders offering some form of incentive fell to 58% in February, down from 62% in January, the lowest share since last August.
