Builder confidence fell for the ninth month in a row in September, hitting its lowest level since May 2014, the National Association Home Builders reported, citing a continuing combination of increased interest rates, building-material supply chain disruptions and high home prices.
The NAHB/Wells Fargo Housing Market Index (HMI) slid three points to 46. Any reading below 50 indicates that more builders view conditions as poor than good.
“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 said in a news release. “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 component measuring buyer traffic fell one point to 31.
“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 another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month.”
Current sales conditions dropped three points to 54, and sales expectations for the next six months dipped one point to 46.
Regionally, the three-month moving average of the index fell in all geographic regions, led by the West, with a 10-point decline to 41 and followed by the South with a seven-point drop to 56, and the Northeast and Midwest, with five-point declines to 52 and 44, respectively.
The NAHB/Wells Fargo survey measures builder perceptions of current single-family home sales, as well as 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.” The results are then used to calculate the seasonally adjusted index.