Lower Mortgage Rates Spark Optimism in Home Construction

With the Federal Reserve holding on future interest rate increases, the U.S. experienced a slight drop in late 2023 mortgage interest rates. Prospects for housing markets brightened slightly in the U.S. Rates on a 30-year mortgage dropped by more than one percent from a recent high in early November to year-end.

This all pointed toward slightly better conditions for home building as 2024 started, as well as the likelihood that construction lumber demand would brighten. FRED (the St. Louis Federal Reserve Bank) showed the average 30-year mortgage rate on December 28 as 6.61%. This was a big increase from early 2023 but down rapidly from 7.76% on November 2.

Meanwhile, the homebuilder confidence index rose slightly (from 34 in November to 37 in December) as compiled by the National Association of Homebuilders and Wells Fargo.

Single-family home building permits issued in November (the latest month recorded as of when this was written) also reflected some modest optimism, with an increase of 4.6% from the prior November.

All of this recent economic data points to a modest improvement in the wood markets tied to home construction as 2024 begins.