US homebuilder confidence drops for fourth month in a row
Washington, DC (CNN) — Homebuilder confidence dropped for the fourth month in a row in November as mortgage rates neared 8%. But recent economic data suggests housing conditions may improve in the coming months.
Builder confidence in the market for newly built single-family homes in November fell six points to 34, according to the National Association of Home Builders / Wells Fargo Housing Market Index released Thursday morning.
The monthly index looks at current sales, buyer traffic, and the outlook for sales of new construction homes over the next six months. Sentiment levels have declined 22 points since July and are at their lowest level since December 2022.
“The rise in [mortgage] 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 Alicia Huey, NAHB chairman.
Higher short-term interest rates have hit builders and developers, too, she said, increasing financing costs.
“While the Federal Reserve is fighting inflation, state and local policymakers could also help by reducing the regulatory burdens on the cost of land development and home building, thereby allowing more attainable housing supply to the market,” Huey said.
Notably, NAHB said, nearly all data for November was collected before the latest Consumer Price Index was released and showed that inflation is moderating.
“While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,” said Robert Dietz, NAHB’s chief economist.
Specificially, Dietz said, 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 down closer to or below 7.5%.
“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,” Dietz said.
Home sales are expected to improve next year, with NAHB forecasting a 5% increase for single-family starts in 2024 as financial conditions ease with improving inflation data.
In the meantime, with rates running over 7% since mid-August, according to Freddie Mac data, many builders continue to reduce home prices to boost sales.
In November, 36% of builders reported cutting home prices, up from 32% in the previous two months. That’s the highest share 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. In November, 60% of builders provided sales incentives of all forms, down slightly from 62% in October.