Builder confidence in the market for newly built single-family homes rose four points to 35 in January, according to the National Association of Homebuilders.
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Homebuilder stocks surged on Tuesday after a slew of earnings showed improving demand from home buyers.The demand from home buyers comes despite the average mortgage rate hovering above 6%.“We saw buyer demand improve as the fourth quarter progressed and can confirm the strength continued through the month of January,” PulteGroup said.
A string of earnings beats sent homebuilder stocks surging on Tuesday as the results show that there is still demand from consumers to buy a home.
Despite near record high home prices and the average mortgage rate still being above 6%, PulteGroup CEO Ryan Marshall said demand is improving in the company’s fourth-quarter earnings call.
“Despite the higher rate environment dominating the national conversation, we saw buyer demand improve as the fourth quarter progressed and can confirm the strength continued through the month of January,” Marshall said.
Shares of PulteGroup surged as much as 10% to a new 52-week high in Tuesday trades. Better-than-expected results from homebuilder NVR also helped boost the sector on Tuesday. Shares of Lennar and Toll Brothers jumped about 3% and 4%, respectively. Shares of NVR jumped as much as 7%.
And according to Marshall, the encouraging demand environment could continue through the year, especially if mortgage rates start to decline.
“We’ll have to see how things progress from here, but I think this improvement attests to the ongoing desire for homeownership that exists in this country,” Marshall said.
The encouraging results from the homebuilders is exactly what bullish stock market investors want to see as they gauge whether a “soft landing” in the economy is possible. Many economists see the stability of the housing market as key to whether the financial health of the consumer holds up.
One encouraging sign that there could be a continued rebound in the housing market is the fact that homebuilder sentiment jumped in January for the first time in a year. That, combined with a gradual decline in the average 30-year fixed mortgage rate from a peak above 7% to about 6.1% today, could fuel the next leg of growth.
“Mortgage rates continue to tick down and, as a result, home purchase demand is thawing from the months-long freeze that gripped the housing market. Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time homebuyers,” FreddieMac said.