Builder confidence continued to be limited as mortgage rates neared 8 percent earlier this month, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
Builder confidence in the market for new single-family homes fell six points this month to 34, its lowest mark since December 2022. Any reading under 50 indicates that more builders view conditions as poor rather than good. The index charting current sales conditions fell six points to 40. The component measuring sales expectations in the next six months fell five points to 39, while the gauge charting traffic of prospective buyers dropped five points to 21.
“The rise in interest 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 NAHB Chair Alicia Huey, a Birmingham, Ala.-based custom home builder and developer. “Moreover, higher short-term interest rates have increased the cost of financing for home builders and land developers, adding another headwind for housing supply in a market low on resale inventory.”
Other data shows that housing conditions could improve in the coming months. NAHB is projecting an approximately 5 percent increase for single-family homes next year as financial conditions ease and inflation lessens in the coming months.
The 10-year Treasury has fallen to the 4.5 percent range for the first time since late December, which Chief Economist Robert Dietz expects will bring mortgage rates near or below 7.5 percent.
“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,” he added.
Thirty-six percent of builders cut home prices this month, up from 32 percent in October. The average price reduction was 6 percent, unchanged from the previous month. Sixty percent of builders provided sales incentives in November, down from 62 percent in October.
Housing numbers improved in October on a monthly basis but remained under year-ago statistics, according to the U.S. Department of Housing and Urban Development and Census Bureau. Privately-owned housing starts increased nearly 2 percent last month to 1.37 million from 1.34 million in September, but remained 4.2 percent under the October 2022 rate of 1.43 million. Single-family housing starts increased 0.2 percent to 970,000 from 968,000 in September.
Other report findings included:
- Privately-owned housing units increased 1.1 percent to 1.48 million from 1.47 million in September but remained 4.4 percent below last October’s rate of 1.55 million. Single-family authorizations increased a half-percent to 968,000 from 963,000 in September.
- Privately-owned housing completions fell 4.6 percent to 1.41 million from 1.47 million in September. Single-family housing completions fell nearly 1 percent to 993,000.