April 15, 2024

Homebuilder confidence was unchanged in April at 51 after having risen 3 points in March to 51 after climbing 4 points in February, 7 points in January, and 3 points in December.  Thus, confidence has risen 17 points in the past five months as mortgage rates have declined by a percentage point.   But keep in mind that the breakeven point for this series is 50.  At 51 it is clear that builders are still cautious. but far less so than they were a couple of months ago.  This series hit bottom in December 2022 at 31. Rising mortgage rates which reached 7.8% at the end of October 2023 spooked builders.  While there was a precipitous slide in homebuilder confidence in the fall, there is hope that conditions have improved and will continue to improve in the months ahead because mortgage rates have since retreated to 6.8%

NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas said, “With many frustrated buyers back on the fence waiting for interest rates to fall, policymakers can help ease affordability challenges by reducing inefficient regulatory rules that raise housing costs and limit supply,”

Chief Economist Robert Dietz said, ““April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed.  With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year, and that mortgage rates will moderate in the second half of 2024.”

Traffic through the model homes rose 1 point in April to 35 after climbing 2 points in March, 3 points in February, 5 points in January,and 3 points in December.  The drop in mortgage rates in recent months has resulted in at least a few more potential buyers although traffic through model homes remains very low.  The breakeven level for traffic is 50.0.  Traffic is still below the norm, but it has improved in recent months.


The homebuilders expectations index fell 2 points in April to 60 after rising 2 points in March, 3 points in February, and having surged 12 points in January and 6 points in December.  The drop in mortgage rates and still steady growth in the economy has encouraged builders that conditions in the housing market will improve steadily throughout 2024.  However, worker shortages and limited supplies of some building materials will dampen builders enthusiasm.

Mortgage rates rose sharply last year from 3.1% at the end of 2021 to 7.8% by the end of October clearly dampened builder enthusiasm, but the recent drop in mortgage rates to the 6.8% mark should spur a further rise in starts in the months ahead.

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  However, if builders ramp up the pace of production and more houses become available, prices should decline somewhat later in the year.

If home prices begin to decline somewhat, and mortgage rates gradually decline to the 6.25% mark, housing affordability should rise sharply as the year progresses.

We expect GDP to increase 2.5% in the first quarter as firms keep hiring new workers at a steady pace, wages keep climbing, and  the unemployment rate remains at or below the full-employment threshold of 4.0%.

Stephen Slifer


Charleston, SC