The housing market slowdown continues as builder sentiment fell for the ninth consecutive month in September. The combination of elevated interest rates, supply chain disruptions, and high home prices are continuing to take a toll on affordability.
Builder confidence for newly built single-family homes fell three points in September to 46, the lowest level since May 2014 with the exception of Spring 2020, according to the most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Buyer traffic is weakening in many markets, as more consumers get priced out of the market due to high mortgage rates and home prices, said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. Another indicator of a weakening market is that 24% of builders reported reducing home prices, up from 19% the previous month.
“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.”
The NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Any score over 50 indicates that more builders view conditions as good than poor.
All three HMI components posted declines in September. Current sales conditions dropped three points to 54; sales expectations in the next six months declined one point to 46; and traffic of prospective buyers fell one point to 31.
The three-month moving averages for regional HMI scores saw the Northeast fall five points to 51, the Midwest drop five points to 44, the South fall seven points to 56, and the West post a 10-point decline to 41.
