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