Builder confidence in the housing market reached a nine-month low in October as mortgage rates continued to hover above 7 percent, according to the National Association of Home Builders/ Wells Fargo Housing Market Index.
Builder confidence in the market for new single-family homes fell four points this month to 40. Any reading under 50 indicates that more builders view conditions as poor rather than good. The index gauging current sales conditions fell four points to 46, while the index charting sales expectations in the next six months dropped five points to 44. The gauge measuring traffic of prospective buyers fell four points to 26.
The drop in confidence came as mortgage rates reached a 23-year high of 7.57 percent earlier this month as the Federal Reserve signals that its monetary policy stance will remain higher-for-longer to cool inflation.
Housing numbers in September increased on a monthly basis but remained under year-ago statistics. Overall housing starts increased 7 percent to nearly 1.35 million, according to the U.S. Department of Housing and Urban Development and Census Bureau. Single-family starts increased 3.2 percent to an annual rate of 963,000 but remained nearly 13 percent under a year ago. Multifamily housing starts increased 17.6 percent to an annualized pace of 395,000.
Privately-owned housing permits fell 4.4 percent in September to an annualized rate of 1.47 million. Single-family permits increased nearly 2 percent to a 965,000 unit rate, which was still 13.4 percent lower than a year ago. Multifamily permits fell 14.3 percent to an annualized pace of 508,000.
“Builders have reported lower levels of buyer traffic, as some buyers, particularly younger ones, are priced out of the market because of higher interest rates,” said NAHB Chair Alicia Huey. “Higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability.”
Other report findings included:
- In September, 674,000 single-family homes were under construction, down nearly 15 percent from a year ago. Combined single-family and multifamily starts were down 23.3 percent in the Northeast, 12.9 percent in the Midwest, 7.8 percent in the South and nearly 17 percent in the West.
- Home builders continue to reduce home prices to boost sales amid high interest rates. Thirty-two percent cut home prices this month, unchanged since September but still the highest rate since last December. Sixty-two percent provided sales incentives this month, a three-point increase from September.