Homebuilder sentiment unexpectedly rises for a third month

U.S. homebuilder sentiment unexpectedly improved for a third month in March, reflecting a pickup in both sales and prospective buyer traffic.

The National Association of Home Builders/Wells Fargo gauge rose 2 points this month to a six-month high of 44, figures showed Wednesday. Among regions, only the South improved. The median estimate in a Bloomberg survey of economists called for a decline to 40.

Measures of current sales and prospective buyer traffic advanced to six-month highs, underscoring pent-up demand despite an increase in borrowing costs over the past year. Even with the recent improvement in sentiment, the gauge is well below levels seen at the end of 2021 or before the pandemic.

The Federal Reserve's aggressive actions to tame inflation have hit the housing market particularly hard. High mortgage rates stifled demand, and new home construction has fallen steeply. Many construction firms still complain of challenges finding skilled labor, and the cost of both labor as well as materials remains elevated. 

Looking ahead, the fallout from the failure of Silicon Valley Bank and related financial turmoil has driven down yields, which could push down mortgage rates and ultimately support demand. Even so, a recovery in the housing sector will likely come in fits and starts.

"While financial system stress has recently reduced long-term interest rates, which will help housing demand in the coming weeks, the cost and availability of housing inventory remains a critical constraint for prospective home buyers," Robert Dietz, NAHB chief economist, said in a statement.

The NAHB report showed sales expectations for the next six months eased. 

February data for housing starts and building permits will be released Thursday.