Homebuilder confidence is rising due to falling mortgages, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

The HMI rose two points in January to 58 on an index that grades any score above 50 as builders viewing conditions more good than poor. Last month, the HMI hit a three-year low. 

“The gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment,” said Randy Noel, NAHB chairman, said in a statement. “Low unemployment, solid job growth and favorable demographics should support housing demand in the coming months.”

Interest rates peaked at a high of around 5 percent in mid-November and have since fallen below 4.5 percent, according to Robert Dietz, the chief economist for NAHB. The decline will help the housing market continue to grow at a modest clip in 2019, he said.

“Builders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry-level of the market,” Dietz added.

The HMI rose in all three categories NAHB tracks: present single-family sales, single-family sales over the next six months, and traffic of prospective homebuyers. Regionally, the HMI rose in the Northeast and West, stayed static in the South and declined slightly in the Midwest.

With the government still partially shut down, there will be no new U.S. Census figures released on housing starts and permits, so NAHB estimates that December data would show total single-family starts in 2018 totaled 876,000 units, up 3 percent over 2017.

The NAHB and Wells Fargo index gauges builder perceptions of single-family home sales and expectations for the next six months on a scale of good, fair or poor. It asks builders to rate traffic for prospective buyers and scores for each component are then used to calculate the seasonally adjusted index.

Email Patrick Kearns

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