Builder sentiment fell for the ninth straight month in September as rising interest rates, supply chain disruptions, and high home price weighed on affordability.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Monday fell three points to 46. Anything below 50 indicates that builders regard conditions as poor.
Forecasters had expected the index to fall one point to 48. This is the third straight month of downside surprises for the index. This is the lowest score since May of 2014, not counting the spring of 20210.
“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “In another indicator of a weakening market, 24 percent of builders reported reducing home prices, up from 19 percent last month.”
Mortgage rates exceeded six percent for the first time since late 2008, Freddie Mac said last week. At the start of the year, rates were around three percent.
“Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large,” Freddie Mac said.
“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week, the highest level since 2008,” said NAHB Chief Economist Robert Dietz. “In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.”