The decline in builder confidence over the past four months was halted by the positive impact of falling mortgage rates, signaling improved conditions in the housing market as we approach 2024.
In December, the National Association of Home Builders Housing Market Index (HMI) revealed a notable increase of three points, bringing builder confidence to a level of 37. This positive shift has been attributed to a substantial drop of approximately 50 basis points in mortgage rates over the last month.
Builders are observing a surge in traffic, indicating a potential uptick in home buyer demand. Robert Dietz, Chief Economist at the National Association of Home Builders, remarked, “The housing market appears to have passed peak mortgage rates for this cycle, and this should help to spur home buyer demand in the coming months.”
The Housing Market Index (HMI), designed to range from 0 to 100, is a weighted average of three indexes. Readings above 50 reflect a generally favorable market view and outlook within the industry. Notably, the HMI experienced a record low of 8 in January 2009 and achieved a record high of 90 in November 2020.