Builder confidence in the market for newly built single-family homes posted its 11th straight monthly decline in November, dropping five points to 33, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the lowest confidence reading since June 2012, with the exception of the onset of the pandemic in the spring of 2020.
To bring more buyers into the marketplace, 59 percent of builders report using incentives, with a big increase in usage from September to November. For example, in November, 25 percent of builders say they are paying points for buyers, up from 13 percent in September. Mortgage rate buy-downs rose from 19 percent to 27 percent over the same time frame. And 37 percent of builders cut prices in November, up from 26 percent in September, with an average price of reduction of 6 percent. This is still far below the 10 percent-12 percent price cuts seen during the Great Recession in 2008.
“Even as home prices moderate, building costs, labor, and materials — particularly for concrete — have yet to follow,” said Robert Dietz, chief economist for NAHB. “To ease the worsening housing affordability crisis, policymakers must seek solutions that create more affordable and attainable housing. With inflation showing signs of moderating, this includes a reduction in the pace of the Federal Reserve’s rate hikes and reducing regulatory costs associated with land development and home construction.”
Derived from a monthly survey that NAHB has been conducting for more than 35 years, 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.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three HMI components posted declines in November. Current sales conditions fell six points to 39, sales expectations in the next six months declined four points to 31, and traffic of prospective buyers fell five points to 20.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 41, the Midwest dropped two points to 38, the South fell seven points to 42, and the West posted a five-point decline to 29.HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at Housing Economics PLUS (formerly housingeconomics.com).