American Home Builders' Confidence Reaches Highest in Six Months as Mortgage Rates Decline

According to a survey of the sector, homebuilders have more confidence in the US real estate market given the drop in mortgage rates and the strong demand for new homes.

The National Association of Home Builders said Tuesday that its index measuring the sentiment of manufacturers had reached 63 points in April, which corresponds to the expectations of economists and reached its highest level since October 2018.

But homebuilders continue to face accessibility issues related to a "chronic shortage of construction workers and building plots," said NAHB President Greg Ugalde.

The group's index remains below the levels observed a year ago. The sentiment was at a reading of 68 in April before reaching its 2018 peak of 70 in May.

Homebuilders have been faced with rising costs due to rising lumber prices and a shortage of labor, while high house prices have prevented many potential buyers to stay out of the way. However, the industry seemed optimistic as the busy spring sales season approached, encouraged by the decline in mortgage rates, which should allow more buyers to return to the market. KB Home chief Jeff Mezger said in March that the Fed's rate hike should "help maintain the favorable macro-economic environment."

The Mortgage Bankers Association has stated that the average rate of a 30-year fixed rate mortgage was set at 4.4% for the week ending April 5, against a high of 5.17% registered in November 2018.

"Continued employment growth, favorable demographics and low interest rate environment will help modestly boost sales growth in the near term," said chief economist of the NAHB, Robert Dietz. "However, supply-side barriers, which exert upward pressure on housing costs, will limit the more robust growth of the housing market."

Home builders reported an increase in the traffic of potential buyers, this component of the April survey having gone from 44 to 47. The index measuring the conditions of sale current rose by one point to 69, while sales forecasts over the next six months fell by one point to 71.