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Workers at a new home construction site in Trappe, Maryland, on October 28, 2022.
Workers at a new home construction site in Trappe, Maryland, on October 28, 2022. (Jim Watson/AFP/Getty Images)

Home builder confidence climbed for the third consecutive month, even as mortgage rates climbed higher for buyers.

That’s according to a March report from the National Association of Home Builders that looks at current sales, buyer traffic and the outlook for sales of new construction homes over the next six months.

It was the strongest showing for the index since September.

After pivoting positive in January for the first time in a year, home building looked set to continue improving as construction prospects improve and inflation cooled. This has been good news for home buyers who have been facing low inventory amid a decades-long national shortfall in building.

Recent instability concerns in the banking system however, are creating more volatility in interest rates and uncertainty for builders.

Mortgage rates had climbed more than half a percentage point over the past month. After recent bank failures, however, mortgage rates are dropping as investors flock to the relative safety of bonds.

“Builders are highly uncertain about the near- and medium-term outlook” despite expected improvement in mortgage rates and March’s improvement in sentiment, said Alicia Huey, NAHB chairman.

The follow-on effects from the banking instability putting pressure on regional banks, as well as continued Fed tightening, will be further constraints for homebuilder’s acquisition, development and construction (AD&C) loans, said Robert Dietz, NAHB’s chief economist.

And that will ultimately be passed on to buyers.

“When AD&C loan conditions are tight, lot inventory constricts and adds an additional hurdle to housing affordability,” he said. “The cost and availability of housing inventory remains a critical constraint for prospective home buyers.”