Homebuilder confidence unchanged in April on mortgage rates

Shares of major homebuilders are dipping lower after the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that Homebuilder Confidence for April remained unchanged from March. It currently sits at 51.

Yahoo Finance Housing Reporter Dani Romero breaks down the data and what it represents for elevated mortgage rates.

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This post was written by Luke Carberry Mogan.

Video transcript

- Build your confidence in the market for newly built single family homes. It was 51 in April. That was the reading, which was unchanged from March, breaking a four month period of gains, according to the NAHB, Wells Fargo, Housing Market Index, Yahoo Finance's Dani Romero is here with a breakdown of what this means for the housing market. A reading of 51, is that surprising here at this juncture?

DANI ROMERO: Well, homebuilders are feeling choked by higher mortgage rates and higher than expected inflation readings during the first quarter of this year. Now, the index stayed at 51 in April, and so any number above 50 really means that builders view that the housing market is really good rather than poor. But mortgage rates remain very high compared to the beginning of this year, which is pushing buyers and sellers to those sidelines, as the spring selling season is really kicking into gear. So the 30 year fixed mortgage rate right now is hovering around 7.3% today, according to Mortgage News Daily.

And home prices haven't leveled off, Brad. Builders aren't in but builders aren't slashing home prices right now compared to what they were doing at the beginning of this year. That's what the National Association of Home Builders reported. Another point to really factor into all of this equation is that a group of researchers from the Federal Housing Finance agency found that the mortgage rate lock in effect could last a few years. Now, that sounds bad news for potential buyers, right? So sorry, you're not going to get that 3% mortgage rate, but this is actually could be good news for builders because we'll need that inventory to be added to the market so they'll be more incentive to build.

But, remember, publicly traded homebuilders have been offering these incentives to attract buyers into that market. So that could still be a factor into this. The popular one is the mortgage rate buy downs. That's when the builder upfronts the cost to lower the rate on the loan. So the new home market will continue to outperform the resale market, especially as these mortgage rates are hovering around that 7%.

- All right. A key reading, key context as well, Danny. Thanks so much. Appreciate it.