Home Business Homebuilder sentiment drops to half of what it was six months ago

Homebuilder sentiment drops to half of what it was six months ago

by TopBusinessView

Homebuilder sentiment drops eight points in October

Homebuilder sentiment in the single-family home market has fallen to half what it was just six months ago as mortgage rates climb, according to a new report.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which is designed to gauge market conditions, fell 8 points to 38 in October from the previous month.

That’s the lowest level since 2012, with the exception of a brief drop at the start of the coronavirus pandemic. A rating below 50 is considered negative.

Builders cite rapidly rising interest rates for the decline in confidence. The average rate on the 30-year fixed was 7.12% on Monday, according to Mortgage News Daily. That’s up from 3% at the start of this year.

“High mortgage rates … have significantly weakened demand, particularly for first-time and first-generation prospective home buyers,” said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia. “This situation is unhealthy and unsustainable.”

A worker stands on the roof of a home under construction at a new housing development in San Rafael, California.

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Of the index’s three components, current sales conditions slid 9 points to 45, and sales expectations in the next six months dropped 11 points to 35. Buyer traffic fell 6 points to 25.

“This will be the first year since 2011 to see a decline for single-family starts,” said Robert Dietz, chief economist for the NAHB.

Given expectations that interest rates will continue to be elevated, Dietz said 2023 is forecast to see additional single-family building declines.

On a three-month moving average, the sentiment score in the Northeast fell 3 points to 48. In the Midwest it dropped 3 points to 41. In the South it fell 7 points to 49 and in the West declined 7 points to 34.


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