Home Builder Sentiment Dips Again: NAHB

Builder confidence in the market for newly built single-family homes fell six points to 34 in November, according to the National Association of Home Builders/Wells Fargo Housing Market Index, the fourth consecutive monthly drop in builder confidence.

Sentiment levels have declined 22 points since July to their lowest level since December 2022, the Housing Market Index said. (Most of the November’s data was collected before the latest Consumer Price Index was released, which showed that inflation is moderating.)

“The rise in interest rates since the end of August has dampened builder views of market conditions, as a large number of prospective buyers were priced out of the market,” said NAHB Chairman Alicia Huey, a home builder and developer from Birmingham, Ala.

CoreLogic Chief Economist Selma Hepp noted homebuilder confidence continues to be hindered by continued high interest rates and low potential homebuyer traffic. “Not only is home affordability impacted by the high rates, but remember that homebuilders use credit as well to pay wages, buy materials, etc.,” she said. “The cost of construction loans also remains pricey due to high interest rates across the board, and that is impacting their ability to do business.”

NAHB Chief Economist Robert Dietz noted that while builder sentiment fell again in November, recent macroeconomic data point to improving conditions for home construction in the coming months. “In particular, the 10-year Treasury rate moved back to the 4.5% range for the first time since late September, which will help bring mortgage rates close to or below 7.5%,” he said. “Given the lack of existing home inventory, somewhat lower mortgage rates will price-in housing demand and likely set the stage for improved builder views of market conditions in December.”

With mortgage rates running above 7% since mid-August, many builders continue to reduce home prices to boost sales, the report said. In November, 36% of builders reported cutting home prices, up from 32% in the previous two months. This is the highest share of builders cutting prices during this cycle, tying the previous high point set in November 2022. The average price reduction in November remained at 6%, unchanged from the previous month. Meanwhile, 60% of builders provided sales incentives of all forms in November, down slightly from 62% in October.