Homebuilder sentiment began the year on a high note, even as concerns surface over regulatory issues affecting demand in 2025.
Confidence in the market for new, single-family homes rose to 47 in January, up a point from December, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Thursday. The January reading was the highest since 51 in April.
Mortgage rates have increased steadily in recent weeks and topped 7% for the first time since May, according to mortgage giant Freddie Mac. Some prospective homebuyers have canceled sales contracts, and builders wonder what potential tariffs imposed by President-elect Donald Trump could mean for borrowing costs and inflation, according to the NAHB.
“Land is expensive and financing for private builders remains costly," NAHB Chairman Carl Harris said in a statement. "However, there is hope that policymakers are taking the impact of regulatory hurdles seriously and will make improvements in 2025.”
From the Homes.com blog: HOA Fees Explained: What Every Homebuyer Should Know
One in three builders surveyed cut home prices in January, and that share has remained stable since last summer, according to the builders' trade group. Other measures holding steady: a 5% average price reduction and 61% of respondents using sales incentives. Builders' sales expectations in the next six months dropped six points, partly due to higher mortgage rates.
People who need to move should accept that a large drop in mortgage rates is not likely, analysts said. Meanwhile, homebuilding across the Sun Belt is expected to remain vibrant in 2025 as new developments sprout up in Florida, Texas and other areas offering balmy temperatures and new jobs.
Privately held GL Homes said it remains bullish on demand for its projects in the Sunshine State, citing warm weather and a lack of a state income tax as driving factors for consumers.
"Many buyers were on the fence due to the election and uncertainty in general," said Marcie DePlaza, chief operating officer of GL, in an email. "But now buyers seem more confident and excited to purchase. Although interest rates continue to cause concern, it doesn’t prevent buyers from moving forward."