Homebuilder sentiment goes up for first time in a year in January

Homebuilder sentiment went up for the first time in a year in January, after declining for 12 straight months, triggering a rally in homebuilder stocks.

What Happened: Recent data released by the National Association of Homebuilders NAHB showed its national Housing Market Index HMI rose moderately from a December low of 31 to a more encouraging 35.

The HMI can range from zero to 100.

Since the year began, homebuilder stocks such as Toll Brothers Inc TOL, Meritage Homes Corp MTH, Lennar Corp LEN, PulteGroup, Inc. PHM and D R Horton Inc DHI are up as much as 13.38%.

The rate of decline slowed even though sentiment was still going down, there were hopes that the HMI had bottomed in December. This prediction was accurate.

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Why is positive sentiment returning to homebuilders?

Mortgage interest rates have fallen from the highs seen in October, and even more since the year began, allowing more potential buyers to enter the market.

It appears that the low point for builder sentiment in this cycle was registered in December, even as many builders continue to use a variety of incentives, including price reductions, to boost sales, according to NAHB Chairman Jerry Konter.

He said that the rise in builder sentiment means that cycle lows for permits and starts are likely to be near, and a rebound for home building could be underway later in 2023 l.

With more homebuilding activity coupled with descending interest rates, there will likely be increased demand for home buying and selling services, which could benefit Opendoor.