Lower mortgage rates open the door for homebuilders
Lower mortgage rates open the door for homebuilders
The U.S. Census Bureau releases data on new home sales for December on Thursday. High interest rates priced many potential buyers out of the market in 2023, making it a tough year for residential construction. But builders may be starting the year with renewed confidence as those interest rates finally start to cool off.
Just a few months ago, average 30-year fixed mortgage rates were hovering around 8%. But since mid-December, they’ve stayed under 7%.
“December normally isn’t a huge month of sales, but it was the best we’ve had in over a year,” said Clint Mitchell, whose company, Estridge Homes, builds higher-end, semi-custom homes in Indianapolis.
He said this wave of new buyers includes people who’ve been on the sidelines of the market, waiting for more favorable rates.
“It feels like there’s some pent-up demand,” he said. And Mitchell said he’s getting a boost from still-low inventory of existing homes.
In Little Rock, Arkansas, demand for Lamonte Grulke’s new builds has been steady.
“We offer a price point that’s appealing with high interest rates,” Grulke said, between $200,000 and $250,000.
But if rates continue to fall, demand is likely to rise.
“You know, I think that’s fuel on the fire,” he said.
Grulke is expecting a busy spring — the season when the housing market typically heats up.
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