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Builder confidence continued its months-long freefall in September, falling for the ninth-straight month, according to data released Monday from the National Association of Homebuilders.
Builder confidence in the newly built single-family home market fell three more points in September to a score of 46 on the Wells Fargo Housing Market Index, the lowest level since May 2014 with the exception of Spring 2020, according to data.
Buyer traffic continues to be low as a result of high mortgage rates — which exceeded 6 percent for the first time since 2008 last week — and more builders are reporting dropping their prices, according to the NAHB.
“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” NAHB Chairman Jerry Konter said in a statement. “In another indicator of a weakening market, 24 percent of builders reported reducing home prices, up from 19 percent last month.”
Builder sentiment has declined steadily throughout every month of 2022, with some economists declaring that the nation is in a housing recession marked by low demand and high construction costs.
“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 percent last week, the highest level since 2008,” NAHB Chief Economist Robert Dietz said in a statement. “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 housing market index is derived from a survey of National Association of Home Builders members that gauges builders perceptions of current single family home sales and sales expectations on a range of “good” “fair” or “poor.” It also asks them to rate buyer traffic “high to very high,” “average” or “low to very low.”
All three components posted declines in September, with current sales conditions dropping three points to 54, sales expectations falling to 46, and buyer traffic falling one point to 31.
Summer, generally considered the busiest season for homebuying, officially comes to an end this week and Fall, generally a slower time of year with school restarting, officially begins, with even eternally-bullish Compass CEO Robert Reffkin expecting an “enormous amount of uncertainty for the rest of the year.”
With builder sentiment plunging during the supposed busy season, it’s unlikely the next few months bring about much of a recovery.