By Joshua Kirby


Confidence among U.S. home builders improved more than expected this month as housing demand outstrips supply and mortgage rates ease, according to a report from the National Association for Home Builders released Monday. Here are the report's main takeaways:

--The NAHB's housing-market index, produced in conjunction with Wells Fargo, rose to 51 in March from 48 in February. The index is a gauge of builder confidence in the market for single-family housing.

--The reading demonstrates greater optimism in the market than economists had expected and marks a move beyond the 50 reading that represents a breakeven point in sentiment. According to a poll carried out by The Wall Street Journal, economists had expected the index to stay stable from a month earlier.

--Homes remain in high demand and buyers are looking increasingly keen to purchase as mortgage rates come down, said Carl Harris, NAHB's chairman. "But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes," Harris said.

--As demand rises, fewer builders are cutting prices as an incentive to draw in buyers, the survey showed, with the share of builders doing so reaching its lowest level since last summer.

--All three major components of the housing-market index improved in March, with current sales conditions increasing most sharply. Similarly, all geographic regions posted rising indexes, led by the Midwest and the West.

--Policymakers at the Federal Reserve will meet this week, and while there is little expectation the bank will announce a cut to its benchmark rate, observers will be watching closely for indications of when it does plan to start loosening monetary policy. Markets are currently pricing in a first full rate-cut in July, though there is also a good chance of a June cut, according to Refinitiv.

--Lower financing costs will draw many prospective buyers into the market, NAHB chief economist Robert Dietz said. A surge in building could however lead to higher prices for materials, especially lumber, he warned.


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


(END) Dow Jones Newswires

03-18-24 1014ET