NAHB: Builder confidence in the market for newly built single-family homes dropped eight points in October to 38 – half the level it was just six months ago.
WASHINGTON – Rising interest rates, building material bottlenecks and elevated home prices continue to take their toll on the nation’s new-home market. Builder sentiment fell for the 10th straight month in October, and one of the index’s components – traffic of prospective buyers – fell to its lowest level since 2012, excluding a two-month period at the start of the pandemic.
In October, builder confidence in the market for newly built single-family homes dropped 8 points to 38 – half the level it was just six months ago – according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
“High mortgage rates approaching 7% have significantly weakened demand, particularly for first-time and first-generation prospective homebuyers,” says NAHB Chairman Jerry Konter. “This situation is unhealthy and unsustainable. Policymakers must address this worsening housing affordability crisis.”
NAHB Chief Economist Robert Dietz says 2022 will be the first year in over a decade (since 2011) to see a drop in single-family housing starts.
“And given expectations for ongoing elevated interest rates due to actions by the Federal Reserve, 2023 is forecasted to see additional single-family building declines as the housing contraction continues,” says Dietz. “While some analysts have suggested that the housing market is now more ‘balanced,’ the truth is that the homeownership rate will decline in the quarters ahead as higher interest rates and ongoing elevated construction costs continue to price out a large number of prospective buyers.”
All three HMI components posted declines in October:
- Current sales conditions fell 9 points to 45
- Sales expectations over the next six months declined 11 points to 35
- Traffic of prospective buyers fell six points to 25
Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points to 48, the Midwest dropped three points to 41, the South fell seven points to 49 and the West posted a seven-point decline to 34.
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
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