Homebuilder confidence climbed for a third straight month even as mortgage rates for buyers climbed.
That’s according to a March report from the National Association of Home Builders that looked at current sales, buyer traffic and the sales outlook for newly built homes over the next six months.
It was the index’s strongest performance since September.
After turning positive in January for the first time in a year, homebuilding looks set to continue improving as the construction outlook improves and inflation cools. That’s good news for homebuyers who have been facing low inventory amid a decades-long national construction shortage.
However, recent concerns about instability in the banking system are creating greater interest rate volatility and uncertainty for builders.
Mortgage rates have climbed more than half a percentage point in the past month. Mortgage rates, however, are falling as investors flock to the relative safety of bonds in the wake of recent bank failures.
NAHB Chair Alicia Huey said that while mortgage rates were expected to improve and sentiment improved in March, “builders are very uncertain about the near- and medium-term outlook.”
NAHB Chief Economist Robert Dietz said banking instability weighing on regional banks and the fallout from continued Fed tightening will further limit acquisition, development and construction (AD&C) lending for homebuilders .
This will eventually be passed on to the buyer.
“When AD&C lending conditions are tight, a lot of inventory shrinks and adds an additional hurdle to housing affordability,” he said. “The cost and availability of housing inventory remains a key limiting factor for potential homebuyers.”