Homebuilder sentiment falls to its lowest level in a year
High mortgage rates continue to put pressure on the nation’s homebuilders, leading to an increase in price cuts to attract buyers. But builders are cautiously optimistic about recent signs that interest rates may soon move lower.
Homebuilder sentiment fell six points to 34 in November on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Anything below 50 is considered negative. Analysts had expected the number to come in unchanged from October.
“The rise in interest rates since late August has damaged builders’ perceptions of market conditions, as a large number of potential buyers have been put out of the market,” said NAHB Chair Alicia Huey in the release. “Furthermore, higher short-term interest rates have increased the cost of financing for homebuilders and land developers, putting another focus on housing supply in a depressed market.” on a resale chart.”
This marks the fourth straight month of decline. Sentiment is down 22 points since July and is now at its lowest level since the end of last year. The builders noted that almost all of the monthly data for November was collected before the monthly consumer price index, released earlier this week, showed that inflation changing.
“Although homebuilder sentiment was down again in November, recent macroeconomic data suggest that homebuilding conditions are improving in the coming months,” said Robert Dietz, NAHB chief economist. , in the publication.
“Notably, the 10-year Treasury rate moved back into 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 home inventory, mortgage prices will be slightly lower in housing demand and may set the stage for better builders’ views on market conditions in December.”
Of the three components of the index, current sales conditions fell six points to 40, sales expectations in the next six months fell five points to 39, and customer traffic fell five points to 21.
More builders said they cut prices in November – 36%, up from 32% in the previous two months. That is the highest share in this cycle, tying the previous high two years ago. The minimum stock dividend was 6%.
NAHB forecasts an increase of about 5% for single family starting in 2024, “as financial conditions ease with improving inflation data in the coming months,” according to the press release .