In December, homebuilder confidence remained stable as high prices and mortgage rates tempered renewed optimism about an improved regulatory environment for the upcoming year, highlighted by data from the National Association of Home Builders and Wells Fargo released on Tuesday. The housing market index, which tracks builder sentiment in the single-family home sector, held steady at 46 on a monthly basis, slightly below the expected index reading of 47 compiled in a Bloomberg survey.
The index measuring present sales conditions stayed at 48 this month, while expectations over the next six months climbed three points to 66, representing its highest level since April 2022. In contrast, the index reflecting the traffic of prospective buyers dipped by one point to 31. "While builders are expressing concerns that high interest rates, elevated construction costs, and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election," stated NAHB Chairman Carl Harris.
"This is reflected in the fact that future sales expectations have increased to a nearly three-year high." The report indicated that 60% of homebuilders employed sales incentives, maintaining an average price reduction of 5% in December. The percentage of builders reducing home prices in December also held steady at 31%, consistent with the prior month.
"NAHB is forecasting additional interest rate cuts from the Federal Reserve in 2025, but with inflation pressures still present, we have adjusted that forecast from 100 basis points to 75 basis points for the federal funds rate," commented NAHB Chief Economist Robert Dietz. "Concerns over inflation risks in 2025 will keep long-term interest rates, including mortgage rates, at levels above 6%." The Federal Reserve’s monetary policy committee began a two-day meeting today, with an interest rate decision expected on Wednesday.
Markets predict that the central bank will decrease interest rates by 25 basis points, as indicated by the CME FedWatch tool..