Builder Confidence Falls 10th Straight Month
Builder confidence in the market for newly built single-family homes fell by eight points in October—its 10th straight monthly drop to the lowest level in 10 years, the National Association of Home Builders reported Tuesday.
The NAHB/Wells Fargo Housing Market Index fell to 38 on a scale of 100 (50 being the median between “good” conditions and “poor” conditions), half its level just six months ago to its lowest level since August 2012. All three HMI components posted declines in October: current sales conditions fell by nine points to 45; sales expectations in the next six months declined by 11 points to 35; and traffic of prospective buyers fell six points to 25.
Regionally, the Northeast fell by three points to 48, the Midwest dropped by three points to 41, the South fell by seven points to 49 and the West posted a seven-point decline to 34.
NAHB Chief Economist Robert Dietz said rising interest rates, building material bottlenecks and elevated home prices continue to weaken the housing market.
“This will be the first year since 2011 to see a decline for single-family starts,” Dietz said. “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 a large number of prospective buyers.”
“High mortgage rates approaching 7% have significantly weakened demand, particularly for first-time and first-generation prospective home buyers,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “This situation is unhealthy and unsustainable.”
Also on Tuesday, the Mortgage Bankers Association’s Builder Applications Survey reported mortgage applications for new home purchases in September fell by 7 percent from August and by 13.2 percent a year ago (see related story this issue).
This morning, the parade of housing reports continues when HUD and the Census Bureau release the September New Residential Construction report, covering housing starts, permits and completions. MBA NewsLink will provide coverage.
