NAHB: Home Builders Concerned Over Housing Market Conditions

NAHB: Home Builders Concerned Over Housing Market ConditionsThe National Association of Home Builders’ Housing Market Index for November showed builders’ growing concerns over U.S. housing market conditions. November’s index reading dropped five points to 33 as compared to October’s reading of 38 and the November 2021 reading of 83. November’s home builder index reading was the lowest reading since June 2012 except during the pandemic. Readings over 50 indicate that most home builders were positive about housing market conditions.

All three index readings that contribute to the HMI reading were also lower. Builder confidence in current housing market conditions fell six points to an index reading of 39. Home builder sentiment over housing markets in the next six months fell four points to an index reading of 31. Home builder expectations for prospective buyer traffic in new housing developments fell five points to November’s reading of 20.

Home Builders Face Multiple Challenges

Home builders continued to face obstacles including rising materials costs and falling demand for homes. Rising mortgage rates and home prices sidelined potential buyers. The Federal Reserve’s decision to raise its target interest rate range to slow inflation caused mortgage rates to rise; home builders asked lawmakers to lower costs related to land development and home construction to offset the impact of rising mortgage rates.

NAHB chairman Jerry Konter said: “Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce. With the housing sector in a recession, the administration and new Congress must turn their focus to policies that lower the cost of building and allow the nation’s home builders to  expand housing production.”

Builders reported offering buyer incentives including mortgage rate buydowns, paying discount points for buyers, and reducing home prices. 37 percent of home builders cut prices in November as compared to 26 percent in September. Price reductions averaged 6 percent. Current home price reductions were lower than reductions of 10 to 12 percent seen during the Great Recession in 2008.

NAHB Chief Economist Robert Dietz said, “To ease the worsening housing affordability crisis, policymakers must seek solutions that create more affordable and attainable housing.” Regional readings for home builder confidence were also lower. Builder sentiment in the Midwest fell 2 points to 38; Builder sentiment in the Northeast fell 6  points to 41, and builder sentiment in the South fell 7  points to 42. Home builder sentiment in the West fell 5 points to an index reading of 29.

NAHB Reports: Home Builder Confidence Drops in October

NAHB Reports Home Builder Confidence Drops in October The National Association of Home Builders (NAHB) reported that home builder sentiment lost its momentum in October and posted a seasonally adjusted reading of 54 in its Home Builder Market Index.

This reading was five points lower than expected and also five points lower than September’s reading. October’s reading was the first time in five months that builder confidence has fallen.

To put October’s reading in perspective, things aren’t all that bad. A reading over 50 indicates more builders are confident about housing market conditions than not. Also, October’s lower reading of 54 after the HMI reading reached a nine-year high in September.

Low Mortgage Rates, Pent-up Demand Expected to Drive Housing Markets

David Crowe, Chief Economist for NAHB said that low mortgage rates, improved labor markets and “significant” pent-up demand for homes all point to continued growth for housing markets.

NAHB reported that builders’ views on current market conditions dropped from September’s reading of 63 to 57 in October. The confidence rating for upcoming sales fell from 67 to 64. The gauge of home buyer traffic for new homes fell by six points to a reading of 41.

Analysts said that although stronger jobs markets can help would-be buyers get into the market, concerns over ultra-strict mortgage standards are dampening potential home sales.

Multi-family Housing Starts Outstrips Single Family Home Construction

Starts for all types of housing gained 8.60 percent in the first eight months of 2014, but single family housing construction accounted for only 3.10 percent of housing starts between January and August. September’s housing starts are set for release today (Friday).

New Jobless Claims Fall to Lowest Since 2005

In related news, the Labor Department reported that weekly jobless claims were lower than expected and also lower than for the prior week. The reading for new jobless claims was 264,000 new claims; this was 23,000 fewer new claims than the prior week’s reading of 287,000 new jobless claims filed. A reading of 289,000 new jobless claims had been expected. This was the lowest reading for new jobless claims since April 2005.