The NAHB/Wells Fargo housing market index rose 3 points to 51 in March after an unrevised 48 in February. The index is above the consensus of 48 in the Econoday survey of forecasters. The increase in builder confidence brings the index above the NAHB's"break even" point of 50 for the first time since 55 in June 2023. Builders see good demand for homes that cannot be satisfied by the present supplies of existing homes and are building to fill the gap. Builders are also more confident while mortgage rates remain below the 7 percent mark. The Freddie Mac measure of rates for a 30-year fixed rate mortgage has seen a monthly average of 6.82 percent in December, 6.64 percent in January, and 6.81 percent in February, with the average for March to-date also at 6.81 percent.

NAHB officials anticipate that if the Federal Reserve begins reducing short-term rates in the second half of 2024, that mortgage rates will dip further and provide more support for new home construction.

NAHB Chief Economist Robert Dietz said,"With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market." He added,"However, as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber."

NAHB Chairman Carl Harris said,"Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year." He added,"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."

In March, fewer builders offered price cuts to tempt buyers. The share of builders offering cuts is down to 24 percent from 25 percent in February, falling for the third month in a row. However, the average price discount remains 6 percent for the ninth month in a row, the NAHB said. The share of builders offering some sort of incentive edges up to 60 percent in March from 59 percent in February, but remains little changed over the past five months.

Forecasters expect the housing market index to hold steady in March after rising 4 points in February to 48, which was better than expected and tied to moderation in mortgage rates.

The housing market index is a monthly composite that tracks home builder assessments of present and future sales as well as buyer traffic. The index is a weighted average of separate diffusion indexes: present sales of new homes, sales of new homes expected in the next six months, and traffic of prospective buyers of new homes.

This report provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the housing market index, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Whether the housing market index reflects new home sales or home resales, once a home is sold, it generates revenues for the realtor and the builder. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.