Builder sentiment was flat in April as mortgage rates remained close to 7% and inflation data remained slightly elevated through the first quarter of the year.

Builder confidence in the market for newly built single-family homes was 51 in April, unchanged from the previous month, according to the NAHB/Wells Fargo Housing Market Index. Last month marked the first time since July 2023 that the index surpassed the breakeven point of 50. The stagnation in the HMI broke a streak of four consecutive monthly gains.

“With many frustrated buyers back on the fence waiting for interest rates to fall, policymakers can help ease affordability challenges by reducing inefficient regulatory rules that raise housing costs and limit supply,” says NAHB chairman Carl Harris.

The April HMI survey found 22% of builders cut prices during the month, down from 24% in March and 36% as recently as December 2023. The average price reduction in April was 6%. The use of sales incentives ticked down to 57% in April from a reading of 60% in March.

“April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed,” says NAHB chief economist Robert Dietz. “With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year, and that mortgage rates will moderate in the second half of 2024.”

The HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months, and traffic of prospective buyers. The HMI component charting current sales conditions in April increased one point to 57 and the component gauging traffic of prospective buyers inched up one point to 35. The index measuring sales expectations in the next six months fell two points to 60.

On a regional basis, the three-month moving average HMI increased four points to 63 in the Northeast, grew five points to 46 in the Midwest, rose one point to 51 in the South, and improved four points to 47 in the West.