WASHINGTON (Reuters) – Confidence among U.S. single-family homebuilders improved for a fourth straight month in April as a dearth of previously owned homes and falling mortgage rates boost demand for new houses, but a shortage of building materials remains a challenge.
The National Association of Home Builders/Wells Fargo Housing Market index edged up one point to 45 this month. A reading below 50 indicates that more builders view conditions as poor rather than good. Economists polled by Reuters had forecast the index unchanged at 44.
“Builders note that additional declines in mortgage rates, to below 6%, will price-in further demand for housing,” NAHB Chairman Alicia Huey, a builder from Birmingham, Alabama, said in a statement. “Nonetheless, the industry continues to be plagued by building material issues, including lack of access to electrical transformer equipment.”
New home sales have increased for three straight months, with buyers eager to take advantage of any dip in mortgage rates. The rate on the popular 30-year fixed mortgage has declined from a peak of 7.08% in early November to 6.27% last week, according to data from mortgage finance agency Freddie Mac (OTC:).
Mortgage rates have dropped in tandem with 10-year U.S. Treasury yields on views that the Federal Reserve was close to pausing its fastest interest rate hiking campaign since the 1980s. The housing market is in recession, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
The NAHB survey found 30% of builders reported reducing prices this month, down from 31% in March. The share using incentives to boost sales climbed to 59% from 58% in March.
The survey’s measure of current sales conditions rose two points to 51. Its gauge of sales expectations over the next six months increased three points to 50. It was the first time both of these components were at 50 or higher since last June.
The component measuring traffic of prospective buyers was unchanged at 31.
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