More Housing Coming? Home Builder Confidence Grows in January

Home builders are feeling optimistic

The supply of for-sale housing, and lack thereof, is perhaps the biggest detriment to home buyers today.

Due to its cascading effect, the inventory scarcity drives up competition and then, prices. But could help be on the way?

It’s beginning to look like it, and an as a leading indicator of housing inventory hit a nine-month high.

Home Builder confidence improves

Home builder sentiment ebbs and flows based on consumer demand, market conditions, shifting costs and supply chain status.

Every month, the National Association of Home Builders (NAHB) and Wells Fargo survey NAHB members to measure this sentiment on a 0-100 scale in their Housing Market Index (HMI) report. The survey comprises three components for single-family housing: current home sales, home sales over the next six months, and traffic of prospective buyers.

In January, builder confidence rose to a score of 47, up from 46 in November and 44 in January 2024. The index reached its highest point since April 2024.

“NAHB is forecasting a slight gain for single-family housing starts in 2025, as the market faces offsetting upside and downside risks from an improving regulatory outlook and ongoing elevated interest rates,” said NAHB Chief Economist Robert Dietz. “And while ongoing, but slower easing from the Federal Reserve should help financing for private builders currently squeezed out of some local markets, builders report cancellations are climbing as a direct result of mortgage rates rising back up near 7%.”

The three index components experienced mixed results month-over-month. Current sales climbed to 51 from 48, sales in the next six months dropped to 60 from 66, and prospective home buyer traffic rose to 33 from 31.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 60. Next came an HMI of 47 in the Midwest, 46 in the South, and 40 in the West.

What other indicators of housing inventory say

In December, active home listings increased 22% annually, according to Realtor.com.

Among the 50 largest cities in the U.S., Miami saw a 45.4% yearly jump in active listing count, trailed by 542.4% in Orlando, Fla., and 41.9% in Denver. San Jose experienced the smallest annual gain, falling 1%. New York and Boston followed with growths of 0.3% and 1.1%, respectively.

For a look ahead, the Census Bureau and Department of Housing and Urban Development put out a joint Monthly New Residential Construction Report, with three leading indicators of housing inventory.

First, building permits hit a seasonally adjusted annual rate (SAAR) of 1.505 million in November. That figure rose 6.1% month-over-month but dipped 0.2% year-over-year.

Next, housing starts reached a SAAR of 1.289 million, down 1.8% monthly and 14.6% annually. Lastly, a SAAR 1.601 million houses were completed in November, 1.9% lower than September but 9.2% above November 2023.

“NAHB is forecasting single-family starts to post a slight increase in 2025 as the financing conditions for builders improve modestly,” said Dietz. “The significant decline for apartment construction is forecasted to end, with that market stabilizing during the second half of next year.”

The bottom line for home buyers

Between low affordability and not enough listings, home buying has been challenging for prospective borrowers.

If you’re a house hunter, it’ll be helpful to grab every advantage you can. Always be prepared so you can move fast, negotiate your mortgage rate, and see if you qualify for down payment and/or closing cost assistance.

If you’re ready to take the next step to homeownership, reach out to a local mortgage professional.