Builder Confidence Down 10 Straight Months as Housing Market Continues to Weaken
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 (excluding the two-month period in the spring of 2020 at the beginning of the pandemic).
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/Wells Fargo Housing Market Index. 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 percent have significantly weakened demand, particularly for first-time and first-generation prospective home buyers,” says Jerry Konter, NAHB chairman. “This situation is unhealthy and unsustainable. Policymakers must address this worsening housing affordability crisis.”
“This will be the first year since 2011 to see a decline for single-family starts,” says Robert Dietz, NAHB chief economist. “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.”
All three HMI components posted declines in October. Current sales conditions fell nine points, sales expectations in the next six months declined 11 points and traffic of prospective buyers fell six points.