Homebuilders across America are feeling quite a bit better about things all of a sudden.

That’s according to an update on builder sentiment released Wednesday, the first of what’ll be a string of housing market reports due over the next two weeks.

The seven-point increase on the NAHB’s gauge was the largest in 11 months.

You know the backstory. Or you should. Sentiment turned bitter in August when rising long-end Treasury yields triggered another sharp increase in mortgage rates which, by October, were flirting with an eight-handle. The mood inflected for the better in December, after rates dropped sharply courtesy of the prior month’s bond rally.

Data out earlier Wednesday showed the average 30-year fixed rate fell to 6.75% on the MBA’s gauge, down half a dozen basis points from the prior week.

Note that since the peak in late October, rates are down 115bps. Mortgage applications rose more than 10% last week.

“If rates continue to ease [we’re] cautiously optimistic that home purchases will pick up in the coming months,” MBA VP Joel Kan remarked.

The NAHB offered some perfunctory color in a press release accompanying the sentiment update. “Lower interest rates improved housing affordability conditions this past month, bringing some buyers back into the market after being sidelined in the fall by higher borrowing costs,” chair Alicia Huey said, on the way to suggesting that growth in single-family starts should “add much needed inventory to the market” this year.

And yet, association chief economist Robert Dietz cautioned on supply-side constraints “in the form of higher prices and/or shortages of lumber, lots and labor.”

Meanwhile, Baird noted that US homebuyers are maxing out the Fannie and Freddie limits. A third of borrowers in Q3 with government-backed mortgages committed half their monthly income to housing payments, double the share seen in Q1 of 2020, prior to the pandemic housing bonanza.

As Kirill Krylov, an MBS strategist at Baird, put it, “At least some borrowers probably have been priced out of Fannie and Freddie financing.” And it’s not just high prices and mortgage rates. Insurance costs have risen sharply as well.