Homebuilder sentiment slid for the fourth month in a row as soaring mortgage rates tanked builder confidence and consumer demand in November.
Builder confidence dropped by six points to 34 in November, marking the fourth consecutive month of declines and the lowest point since December 2022, according to the latest results from the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which is based on a monthly survey of home builders.
Overall, all three major HMI indices posted declines in November. The gauge for prospective buyers dropped by five points to 21, current sales conditions decreased by six points to 40, and the component charting sales expectations over the next six months fell by five points to 39. In general, a number over 50 indicates that more builders view sales conditions as good than poor.
“While builder sentiment was down again in November,” said Robert Dietz, NAHB chief economist, “recent macroeconomic data point to improving conditions for home construction in the coming months.”
In particular, Dietz said that the 10-year Treasury rate moving back to the 4.5% range is likely to 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,” he said in a statement.
In October, the average 30-year fixed mortgage rate in the U.S. climbed to 8.03%, the highest rate in 23 years, according to Mortgage News Daily, which tracks historical mortgage rate data.
“For many would-be homebuyers, a mortgage rate above 7% simply means that the numbers do not work for them,” said Lisa Sturtevant, chief economist at Bright MLS, a real estate agency based in Maryland, Bankrate reported. “Consumer confidence has started to stumble as individuals and households are becoming more anxious about the economy.”
To account for the lower sentiment, 1 in 3 homebuilders (36%) surveyed admit to cutting prices in order to boost sales. This is up from 32% in the previous two months, according to the NAHB.
While sentiment is down in November, the NAHB forecasts a roughly 5% increase for new home starts in 2024 as financial conditions and mortgage rates ease.
As previously covered by The Dallas Express, home sales nationwide have been dampened by surging mortgage interest rates and stubbornly high home prices. At the same time, buyer demand has remained robust in Texas compared to other parts of the country.
Development Services Department officials in Dallas have been turning out residential permits for single-family homes quicker than in previous years to help grow the housing inventory to meet demand. However, overall building permit activity under City Manager T.C Broadnax has been down year over year, possibly due to periodic delays and backlogs in operations.
