Housing Becoming Unaffordable, NAHB Housing Market Index Slide Continues to May 2014 Levels

The NAHB housing market index fell three points in September to 46, the lowest level since May 2014 with the exception of the spring of 2020. Forecasts were for a moderate fall of 47. Builder sentiment has declined every month in 2022. Mortgage recently hit the highest rate since 2008 and inflation has been soaring to 40-year highs striking out affordability for many. More than half of the builders in their survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.

United States NAHB Housing Market Index

US NAHB home builder sentiment September 2022

  • NAHB HMI 46 vs 47 expected Prior was 49
  • Current single-family home sales 54 vs 57 prior
  • Sales over the next six months 46 vs 47 prior
  • Index of prospective buyers 31 vs 32 prior

Regional HMI Scores

Looking at the three-month moving averages for regional HMI scores,

  • Northeast fell five points to 51,
  • Midwest dropped five points to 44,
  • South fell seven points to 56
  • West posted a 10-point decline to 41.

“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,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month.”

The big question is how much damage has the Fed raising rates inflicted that is causing even deeper damage?

“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. “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.”

About National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI)

Based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

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.

Source: NAHB

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