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Home Builder Sentiment Jumps

Economic Observer: Up-to-date information on the latest financial news

Overview: Market-moving events were scarce over the past week, with the most significant economic data coming from the housing sector. Its impact was minor, and mortgage rates ended the week with little change.


Higher mortgage rates and a shortage of inventory continue to restrain housing market activity. In January, sales of existing homes, which make up about 85% of the market, rose a bit from December but were still a little lower than last year at this time. Inventory levels stand at just a 3-month supply nationally, well below the 6-month supply typical in a balanced market, and the number of single-family homes available for sale remains near the lowest level in decades. The median existing-home price is $379,100. To put this in perspective, median home prices rose about 50% from the middle of 2020 to a peak of $416,000 at the end of 2022 before higher mortgage rates caused prices to ease back down to current levels.


The latest results were similar for the segment containing newly constructed homes. In January, new-home sales, which account for the remaining 15% of the market, increased 2% from December, near the best level since early 2022. The median new-home price of $420,700 was 3% lower than last year at this time, and builders have been widely reporting offering financial incentives to try to lure buyers.


Without a doubt, more homes continue to be desperately needed in many regions, but the latest data revealed mixed results. In January, single-family housing starts fell 5% from December. On the other hand, single-family building permits, a leading indicator of future construction, rose slightly to the best level since May 2022. In addition, a separate survey of home builder sentiment on housing market conditions from the National Association of Home Builders (NAHB) jumped from 44 to 48, far exceeding expectations.


Existing-Home Sales (millions)

Chart of Existing Home Sales in millions from May 2023 to January 2024


Week Ahead

Feb. 29

Personal Income and Outlays

Personal Consumption Expenditures (PCE) Price Index

Mar. 1

Institute for Supply Management (ISM) Manufacturing Index

Mar. 5

ISM Services Index

Mar. 8

Employment Report


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