Builder confidence pushed into positive territory in June for the first time in 11 months, according to theupdate released Monday. The index reading rose to 55 from 50 in May, marking the sixth month in a row that sentiment increased and the first time it crossed the midpoint of 50 since July 2022.
As mortgage rates rose rapidly last year because of the Federal Reserve’s aggressive efforts to combat inflation, homebuyers fled to the sidelines. They returned, though, at the beginning of the year, resigned to stomaching the higher borrowing costs.“Overall, buyers appear to be adjusting to mortgage rates that have stabilized in the 6% to 7% range,” Toll Brothers Chairman and CEO Douglas C. Yearley said in late May, during the builder’s second-quarter earnings call.
“Now with 90% of outstanding mortgages under 5%, the market is seeing the further impact of a low interest rate lock-in effect, existing homeowners are reluctant to give up their low rate mortgages, which has led to historically tight resale inventories,” Yearley said last month. A house under construction is seen in Los Angeles, California, U.S., June 22, 2022. REUTERS/Lucy NicholsonAnother boost to builders is an improving supply chain wrought by the pandemic. Lumber costs are down. Hiring also has gotten a bit easier.