Birmingham, Ala. – Homebuilders in Alabama are expressing growing confidence in the housing market due to a decline in mortgage rates, which is expected to lead to stronger demand from potential buyers.
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment increased by 4 points to 48 in February. This marks the third consecutive month of growth and the highest level since August 2023. The latest rise in confidence exceeded the expectations of economists, who had forecasted a reading of 46.
The positive trend reflects the momentum in the newly constructed home market and the anticipation of further declines in mortgage rates, which is expected to stimulate more interest from buyers.
NAHB Chairman Alicia Huey, a custom home builder and developer, noted an improvement in buyer traffic, attributing it to even slight decreases in interest rates, which tend to have a disproportionate positive effect on potential home purchasers.
A decline in mortgage rates from last year’s nearly 8% peak has prompted more builders to reduce home prices to stimulate sales. In February, 25% of builders reported reducing home prices, down from 31% in January and 36% in the last two months of 2023.
Additionally, the percentage of builders offering incentives dropped to 58% in February, down from 62% in January and the lowest share since last August. These trends suggest that homebuilders are adapting to the changing market conditions and are cautiously optimistic about the outlook for the housing market in the near future.