• According to the latest data from the National Association of Home Builders (NAHB), homebuilding
confidence is on the rise. The NAHB/Wells Fargo Housing Market Index (HMI) rose seven index points to
a level of 42, its highest reading since September and the most significant monthly increase in the index
since June 2013.
• Homebuilder sentiment registered at 81 one year ago, but started to fall as mortgage rates and other
borrowing costs slowed demand and hindered supply in 2022. While index levels below 50 are considered
in ‘pessimistic’ territory, sentiment had fallen to a low of 31 in December.
• According to analysts at NAHB, the uptick in sentiment reflects recent incremental gains in housing
affordability amid a persistent housing shortage.
• Despite reducing their pace of rate increases in January, leading to increased market optimism, recently
released minutes from the FOMC’s January meeting show that most officials remain “highly” concerned
about inflation.
• The resilience of labor market tightness has some FOMC members concerned about the upward pressure
that wages may continue to place on broader prices. Officials note that while recent monthly data has
warranted a slowing of their tightening efforts, they will need “substantially more” evidence of slowing
inflation across the board before halting rate increases.
• Notably, a “few” members expressed a need to maintain a 50 basis point increase in January. FOMC
members have converged in their economic projections over the past several months, so a crack in the
consensus could be a significant signal about the uncertainty of our current economic picture.
• As of February 23rd, 73% of the market expects a 25 basis point increase at the FOMC’s March meeting,
while 27% expect a 50 basis point hike. One week ago, before the minutes were released, expectations at
these levels were 85% and 15%, respectively.

Read the full report here