Confidence among US single-family homebuilders climbed in April, the fourth-straight month this measure has increased as declining mortgage rates and low inventory bolster demand for new homes.
The National Association of Home Builders/Wells Fargo's gauge of builder sentiment rose one point to 45 according to figures released Monday, matching Wall Street expectations.
This measure still reflects general caution among builders as we head into the heart of housing's spring selling season. Readings under 50 for this index show a larger proportion of builders responding to the survey see conditions as "poor" than those who see conditions in the market as "good."
"For the fourth straight month, builder confidence has increased due to a lack of resale inventory despite elevated interest rates," NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala., said in the press release.
Recent data from realtor.com showed there were nearly 60% more homes on the market in March compared to the same month last year. But inventory levels still stood more than 50% below what prevailed during the years leading up to the pandemic.
"Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10%," said NAHB Chief Economist Robert Dietz.
"More buyers looking at new homes, along with the use of sales incentives, have supported new home sales since the start of 2023. And while [Acquisition, Development & Construction] loan conditions are tight, there is not significant evidence thus far that pressure on the regional bank system has made this lending environment for builders and land developers worse," he added.
Another major factor contributing to stronger optimism among homebuilders is the modest pullback in rates seen in recent weeks.
The average 30-year mortgage rate stood at 6.27% last week, down from closer to 6.75% in early March and nearly 7% in late 2022.
"Builders note that additional declines in mortgage rates, to below 6%, will price-in further demand for housing. Nonetheless, the industry continues to be plagued by building material issues, including lack of access to electrical transformer equipment," Huey said.
The NAHB's measure of current sales conditions increased in April and sales expectations for the next six months rose, marking the first time these components of the report came in above 50 since June 2022.
Meanwhile, the gauge of upcoming buyer traffic was unchanged.
Builder sentiment in April climbed across all regions in the Northeast, Midwest, South, and West.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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