Housing market trends continue to indicate growth for 2024, despite a myriad of challenges over the last quarter. The National Association of Home Builders (NAHB) notes that despite elevated interest rates, home builder sentiment and construction starts indicate the potential for housing sector growth in the current months. Although permits and starts were slightly flat or down month over month, they are up year over year both nationally and in several key regions for both Belco and our trade partners. Let’s continue to look under the hood of housing market trends in this month’s Belco Bulletin.
Home Builder Sentiment on the Rise
At the national level, home builder sentiment finally jumped over the magic mark, adding 3 points for an index of 51. This is the first time we have seen this number trending on the confident side since the last break-even reading in August 2023. The South region saw a 2-point increase to 52, while the West region dropped 2 points to 45, possibly due to the dip in starts and permits month over month. While the index in the West did drop slightly, it has remained steady in the mid 40 range which indicates consistency in regional home builder sentiment.
Buyer Demand Remains Strong
According to NAHB Chairman Carl Harris, “Buyer demand remains brisk, and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year.” The 30-year mortgage rate has steadily fallen or flattened since its fall 2023 high and sits at 6.79% as of 3/28/2024. This bodes well for builders heading into the next three quarters of the year.
Home Pricing Stabilizing
In January, the median home price was posted at $310,455 by FRED (Federal Reserve Economic Data). While still up from a year ago, it’s the third straight month of slight decline. This stability in home pricing will also help encourage those waiting patiently to enter the market. That stability in the National Home Price Index is reflected here, showing relatively flat to slight increase over the past 24 months:
Strong Outlook for Single-Family Construction
The long-term housing market trends also look promising, with single-family construction still taking the lion’s share of the market in 2024 and beyond. According to the NAHB Executive Level Forecast, they anticipate over 1 million single-family starts in 2024, a growth of 7.76% over 2023 and 2.91% growth over last month’s forecast of 988,000 starts. They’ve also boosted their 2025 single-family starts number to 1.048 million, an additional growth of 3.08% over 2024.
Supply-Side Challenges Remain
However, NAHB’s Chairman Harris also noted that despite robust consumer demand, construction companies are still grappling with constraints on the supply side. There are several hurdles to consider here. Firstly, there is a shortage of available land plots suitable for development. Next, construction companies face a lack of skilled workers in the labor force. Additionally, builders are wrestling with the implementation of new restrictive regulations that drive up expenses in residential construction projects. Finally, Chief Economist Robert Dietz states that “as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber.” Housing growth outpacing lumber production could lead to price increases.
Housing Market Trends: Belco’s Plan of Action
Accordingly, Belco leadership is staying a step ahead in light of these housing market trends. In consulting with our Lumber Procurement Manager, we are aware that while lumber costs are lower today, they perhaps haven’t yet absorbed the full effects of inflation. While we do not expect to see 2021/2022 levels again, there is definitely more upward pressure on prices than downward. We will continue to work diligently using our superior forecasting model to ensure a reliable and trustworthy inventory experience for our customers.
