The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) declined 6 points to 34 in November. This is the fourth consecutive monthly drop in builder confidence, as sentiment levels have declined 22 points since July and are at their lowest level since December 2022.
“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 Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. “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. 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.”
“While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,” said NAHB Chief Economist Robert Dietz. “In particular, 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 close 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.”
All three major HMI indices declined in November. The HMI index gauging current sales conditions fell 6 points to 40, the component charting sales expectations in the next six months dropped 5 points to 39 and the gauge measuring traffic of prospective buyers dipped 5 points to 21.
Looking at the three-month moving averages for regional HMI scores, Northeast fell 1 point to 49, the Midwest dropped 3 points to 36, the South fell 7 points to 42 and the West posted a 6-point decline to 35.
Read the NAHB release.