Builder Confidence Down 10 Straight Months as Market Continues to Weaken

2022-10-18T09:20:36-05:00

By Robert Dietz on October 18, 2022 • In a further signal that rising interest rates, building material bottlenecks and elevated home prices continue to weaken the housing market, builder sentiment fell for the 10th straight month in October and traffic of prospective buyers fell to its lowest level since 2012, with the exception of two months during the Spring of 2020. 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 — according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the lowest confidence reading since August 2012, with the exception of the onset of the pandemic in the spring of 2020. High mortgage rates approaching 7% have significantly weakened demand, particularly for first-time and first-generation prospective home buyers. This will be the first year since 2011 to see a decline for single-family 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.  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 large number of prospective buyers. Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo 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. All three HMI components posted declines in October. Current sales conditions fell nine points to 45, sales expectations in the next six months declined 11 points to 35 and 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 tables can be found at nahb.org/hmi. Related ‹ Single-Family Permits Decline in August 2022Tags: hmi, home building, housing, single-family

Builder Confidence Down 10 Straight Months as Market Continues to Weaken2022-10-18T09:20:36-05:00

Builder Confidence Falls for Eighth Consecutive Month

2022-08-15T09:18:05-05:00

Builder confidence fell for the eighth straight month in August as elevated interest rates, ongoing supply chain problems and high home prices continue to exacerbate housing affordability challenges. In another sign that a declining housing market has failed to bottom out, builder confidence in the market for newly built single-family homes fell six points in August to 49, marking the first time since May 2020 that the index fell below the key break-even measure of 50, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The August buyer traffic number in the builder survey was 32, the lowest level since April 2014 with the exception of the spring of 2020 when the pandemic first hit. Tighter monetary policy from the Federal Reserve and persistently elevated construction costs has brought on a housing recession. The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011. However, as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in the coming months. Roughly one-in-five (19%) home builders in the HMI survey reported reducing prices in the past month to increase sales or limit cancellations. The median price reduction was 5% for those reporting using such incentives. Meanwhile, 69% of builders reported higher interest rates as the reason behind falling housing demand, the top impact cited in the survey. Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo 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. All three HMI components posted declines in August and each fell to their lowest level since May 2020.  Current sales conditions dropped seven points to 57, sales expectations in the next six months declined two points to 47 and traffic of prospective buyers fell five points to 32. Looking at the three-month moving averages for regional HMI scores, the Northeast fell nine points to 56, the Midwest dropped three points to 49, the South fell seven points to 63 and the West posted an 11-point decline to 51. The HMI tables can be found at nahb.org/hmi. Related ‹ Building Materials Prices Increase in July as Concrete SurgesTags: economics, hmi, home building, housing

Builder Confidence Falls for Eighth Consecutive Month2022-08-15T09:18:05-05:00

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