By Joshua Kirby


Confidence among U.S. home builders improved for a third straight month as expectations increase for a prompt cut in interest rates this year. That's according to a report from the National Association for Home Builders released Thursday. Here are the report's main takeaways:

--The NAHB's housing-market index in conjunction with Wells Fargo, a gauge of builder confidence in the market for single-family housing, rose to 48 in February from 44 in January.

--The index climbed more than economists had expected, according to a poll compiled by The Wall Street Journal ahead of the release.

--More buyers are looking into acquiring homes, as even minor cuts to interest rates draw positive responses from home-seekers, NAHB Chair Alicia Huey said. "While mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year," Huey said.

--New-home purchases should rise by around 5% this year as rates come down, according to NAHB's estimates. The Federal Reserve is expected to start cutting rates in May or June, barring an unexpected resurge in inflation.

--A quarter of home-builders cut prices in February, a lower rate than in previous months, though the average price reduction remained stable at 6%.

--All three major components of the housing-market index increased in February, with current sales conditions, sales expectations for the coming months, and buyer-traffic rising by around the same amount, respectively. Similarly, all geographic regions posted rising indexes.

--Supply could prove short as demand rises, NAHB Chief Economist Robert Dietz warned. "As builders break ground on more homes, lot availability is expected to be a growing concern, along with persistent labor shortages," Dietz said. "The recovery will be bumpy as buyers remain sensitive to interest rate and construction cost changes."


Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby


(END) Dow Jones Newswires

02-15-24 1014ET