2024.01.1715:14:00UTC+00U.S. Homebuilder Confidence Improves More Than Expected In January

The National Association of Home Builders released a report on Wednesday showing a significant improvement in U.S. homebuilder confidence in the month of January.

The report said the NAHB/Wells Fargo Housing Market Index jumped to 44 in January from 37 in December. Economists had expected the index to rise to 39.

"Lower interest rates improved housing affordability conditions this past month, bringing some buyers back into the market after being sidelined in the fall by higher borrowing costs," said NAHB Chairman Alicia Huey

"Single-family starts are expected to grow in 2024, adding much needed inventory to the market," she added. "However, builders will face growing challenges with building material cost and availability, as well as lot supply."

The bigger than expected increase by the housing market index partly reflected a surge by the component measuring sales expectations in the next six months, which spiked to 57 in January from 45 in December.

The index charting current sales conditions also shot up to 48 in January from 41 in December, while the component gauging traffic of prospective buyers jumped to 29 in January from 24 in December.

"Mortgage rates have decreased by more than 110 basis points since late October per Freddie Mac, lifting the future sales expectation component in the HMI into positive territory for the first time since August," said NAHB Chief Economist Robert Dietz.

He added, "As home building expands in 2024, the market will see growing supply-side challenges in the form of higher prices and/or shortages of lumber, lots and labor."

On Thursday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of December.

Housing starts are expected to tumble to 1.43 million in December from 1.56 million in November, while building permits are expected to rise to 1.48 million in December from 1.46 million in November.