January 16, 2025

This series rose 1 point in January to 47 after having been unchanged in December and  having risen 3 points in November.  The recent gains seem to reflect hope that the Trump administration will cut a lot of the red tape that has been impeding the housing industry.  Keep in mind that the breakeven point for this series is 50 so at 47 it is clear that builders are still being cautious  They are bothered by mortgage rates that at 6.9% are still relatively high.  They are also bothered by the inability to hire as many workers as they would like, by the relative scarcity of lots on which to build, and onerous local regulations.

NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas said, “Builders are facing continued challenges for housing demand in the near-term, with mortgage rates up from near 6.1% in late September to above 6.9% today.  Land is expensive and financing for private builders remains costly. However, there is hope that policymakers are taking the impact of regulatory hurdles seriously and will make improvements in 2025.”

Chief Economist Robert Dietz said, “NAHB is forecasting a slight gain for single-family housing starts in 2025, as the market faces offsetting upside and downside risks from an improving regulatory outlook and ongoing elevated interest rates.  And while ongoing, but slower easing from the Federal Reserve should help financing for private builders currently squeezed out of some local markets, builders report cancellations are climbing as a direct result of mortgage rates rising back up near 7%.”

Traffic through the model homes rose 2 points in January to 33 after having fallen 1 point in December and having increased 3 points in November.   Traffic through model homes remains low as still high mortgage rates are reducing the number of interested buyers.

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The homebuilders expectations index fell 6 points in January to 60 after having risen 3 points in December, 7 points in November,and 4 points in both October  The increases  in recent months reflect a hope that the Trump administration will alleviate much of the regulatory environment that has been impeding growth in the housing industry.

Mortgage rates are now hovering at the 6.9% mark which is relatively expensive. Both potential home buyers and builders expect them to decline as 2025 progresses given the continuing slowdown in inflation and likely rate reductions by the Federal Reserve.

Home prices rose sharply for almost two years from mid-2020 through the spring of last year.  They then fell for eight consecutive months.  An acute shortage of homes available for sale has caused prices to climb again in recent months  Builders lack of enthusiasm is likely to translate into only a small increase in housing starts in the months ahead.

If home prices are relatively steady, the economy continues to crank out jobs, wages rise, and mortgage rates gradually decline to the 5.8% mark, housing affordability should increase considerably by the end of next year.

We expect GDP growth to be 2.5% in the fourth quarter and 2.9% growth in 2025.

Stephen Slifer

NumberNomics

Charleston, SC