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Homebuilder sentiment goes negative for the first time in 7 months, thanks to
higher mortgage rates
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Real Estate


HOMEBUILDER SENTIMENT GOES NEGATIVE FOR THE FIRST TIME IN 7 MONTHS, THANKS TO
HIGHER MORTGAGE RATES

Published Mon, Sep 18 202310:00 AM EDTUpdated Mon, Sep 18 202311:04 AM EDT
Diana Olick@in/dianaolick@DianaOlickCNBC@DianaOlick
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Key Points
 * Builder confidence in the single-family housing market fell 5 points in
   September to 45.
 * Fifty is the line between positive and negative sentiment.
 * Current sales conditions fell 6 points to 51, and sales expectations in the
   next six months also fell 6 points to 49. Buyer traffic dropped 5 points to
   30.

watch now
VIDEO1:0901:09
Homebuilder sentiment goes negative for the first time in 7 months
Squawk on the Street


U.S. homebuilders are feeling pessimistic about their business for the first
time in seven months, thanks to stubbornly high mortgage rates.

Builder confidence in the single-family housing market fell 5 points in
September to 45 on the National Association of Home Builders/Wells Fargo Housing
Market Index. The decrease follows a 6-point drop in August. Anything below 50
is considered negative.



The index’s three components all declined. Current sales conditions fell 6
points to 51, and sales expectations in the next six months also dropped 6
points to 49. Buyer traffic decreased 5 points to 30.

Builders cite weaker affordability due to higher mortgage rates. The average
rate on the popular 30-year fixed mortgage has been over 7% since June.

As a result, builders are starting to offer more incentives again. In September,
32% of builders said they cut prices, compared with 25% in August. That’s the
largest share of builders reducing prices since December 2022, when 35% were
doing so.

The average price cut was 6%.

“High mortgage rates are clearly taking a toll on builder confidence and
consumer demand, as a growing number of buyers are electing to defer a home
purchase until long-term rates move lower,” said Robert Dietz, NAHB’s chief
economist, in a release.



A shift is also occurring among those buyers who are still in the market. The
NAHB added a new question to this month’s survey and found that 42% of new
single-family home buyers year to date were first-time buyers. That is much
higher than the historical norm of around 27%.

While builders are still benefiting from the lack of supply on the existing
sales market, they are also facing hurdles other than higher interest rates.

“On the supply-side front, builders continue to grapple with shortages of
construction workers, buildable lots and distribution transformers, which is
further adding to housing affordability woes. Insurance cost and availability is
also a growing concern for the housing sector,” said NAHB Chairman Alicia Huey,
a homebuilder and developer from Birmingham, Alabama.

Regionally, on a three-month moving average, sentiment in the Northeast fell 2
points to 54. In the Midwest it dropped 3 points to 42.

In the South it declined 4 points to 54, and in the West it decreased 3 points
to 47.


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