Could U.S Builder Confidence Be A Setup For Disappointment?

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Confidence continues to rise, with “cautiously optimistic” builders driving confidence in newly built single-family homes rising yet again in Feb by 7 points to 42 according to the National Association of Home Builders (NAHB)– the highest since September 2022 and the highest single monthly jump since 2013. NAHB chief economist Robert Dietz is quoted as saying, “Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle.” Many news outlets, including CNN, Yahoo! Finance, and Forbes, have covered this news as well, hopefully signaling the recovery of a market that has been volatile for some time now.


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Even celebrity Shark Tank and real estate investor Barbara Corcoran, shared in the optimism in a Yahoo! Finance video interview, saying: “I think the worst is behind us because the housing market is showing signs of life for the first time in the last year.” She went on to say that many people believed, “whether it’s true or not,” that the Fed was done lifting rates.

The problem is the mortgage rates they’re referring to may not be accurate. Yahoo! Finance reported the rate at 6.33% on February 15th, quoting Freddie Mac. However, as per this article from Mortgage News Daily (MND), the mortgage rate is likely higher than reported. The issue is Inherent in Freddie Mac’s methodology of calculating the rate, while accurate for the period it reports on, is “stale” or outdated by the time of publishing. According to MND, the 6.33% looks closer to 6.80%, ouch.

In fact, hopes which were buoyed by the falling mortgage rates by the end of January, should be waning due to the Mortgage News Daily reporting on 2/17/2023, an APR for a 30 Yr Fixed Mortgage was sitting at 6.80%, the highest its been in 2023, inching ever closer to the big 7%. Now we’re glass-half-full kind of guys, and we love us some Barbara Corcoran, but we still advise caution for the immediate future. The Fed may not be entirely done playing with the rates as inflation has been stubborn leading into 2023, so the early optimism may give way to a harsh reality – time will tell.


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That being said, optimism in the market can lead to a growth in investment activity, enough of which can help stabilize rates and prices. Even so, don’t expect this to happen overnight. So keep your eyes open, invest cautiously, and monitor the developments over the next few weeks to see how it all shakes up.

If you do decide to take advantage of this cautious optimism and invest in real estate during these uncertain times, you may be looking for reliable financing. Our team of specialists is always ready to help match you with affordable, reputed lenders, so get in touch!


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