Builder confidence in the market for newly built single-family homes rose for the fourth month in a row in April. Homebuilders remained cautiously optimistic that the lack of existing inventory would drive demand for new homes, despite elevated interest rates and construction costs, the National Association of Home Builders reported.
Specifically, the NAHB/Wells Fargo Housing Market Index (HMI) rose one point to 45. Any number over 50 indicates that more builders view conditions as “good,” rather than “poor.”
“Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10%,” NAHB Chief Economist Robert Dietz said in a press release. “More buyers looking at new homes, along with the use of sales incentives, have supported new home sales since the start of 2023.”
The share of builders reducing home prices slid to 30% in April from 31% in March and February. The average price reduction in April was 6%, the same as in February and March but lower than the 8% seen in December. Meanwhile, the share of builders using incentives to bolster sales rose to 59% from 58% in March; it was 62% in December.
The HMI is made up of three components, two of which rose in April. The component gauging current sales conditions rose two points to 51, and the gauge measuring sales expectations in the next six months rose three points to 50. The component measuring traffic of prospective buyers was flat at 31.
Regionally, the three-month moving average of the index rose in all geographic regions, rising four points to 46 in the Northeast, four points to 49 in the South, four points to 38 in the West and two points to 37 in the Midwest.