After a year of consecutive monthly declines, homebuilder sentiment rose in January.

The National Association of Homebuilders (NAHB) Housing Market Index (HMI) has gone up from December’s low of 31 to 35, signaling a more optimistic outlook for the homebuilding industry in 2023.
The main factor contributing to this increase in sentiment is the slight drop in mortgage interest rates. In November, rates on a 30-year fixed mortgage fell from 7% to 6.61%. This market correction led to price drops in some overheated markets, making it more affordable for potential homebuyers. By January 5th, 2023, rates had dropped to 6.48%. This has resulted in an increase in homebuyer demand, which has led to a rise in homebuilder sentiment.
The NAHB predicts that with this increase in sentiment, we will likely see an increase in permits and new builds for single-family homes. However, it is essential to remember that while this uptick in sentiment is a positive sign, homebuilders are generally considered optimistic when the number is 50 or higher. The current score of 35 still has room for improvement, but it is a promising start to the year.