NAHB housing market index fell for a second month to 45 in September 2023, the lowest in five months, from 50 in August and below forecasts of 50. July which was the highest reading at 56 in this cycle and was just second time that sentiment levels have surpassed the midpoint of 50 since July 2022. Mortage rates are over 7% (per Freddie Mac). Current single-family home sales fell to to 51 from 57 and prospective buyers dropped 5 points to 30. The sub-index for home sales over next six months decreased 6 points to 49. 42% of new single-family home buyers were first-time buyers on a year-to-date basis in 2023. This is significantly higher than the 27% reading from a more normalized market in 2018.
Inflation is striking out affordability for many. Confidence had been rising with a lack of resale inventory despite elevated interest rates, that appears to have waned. There is underlying strong demand for new construction driven by the limited housing supply, however buyers are now deferring purchases. Location is critical and rent plays a part. Redfin reported in April that U.S. rents saw the first annual slump since the pandemic hit in March 2020.
US NAHB home builder sentiment September 2023
- NAHB HMI 45 vs 50 expected Prior was 50
- Current single-family home sales 51 vs 57 prior
- Sales over next six months 49 vs 55 prior
- Prospective buyers 30 vs 35 prior
“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. Putting into place policies that will allow builders to increase the housing supply is the best remedy to ease the nation’s housing affordability crisis and curb shelter inflation”, said Robert Dietz, chief economist at the NAHB.
Regional HMI Scores
Looking at the three-month moving averages for regional HMI scores,
- Northeast fell two points to 54,
- Midwest dropped three points to 42,
- South fell four points to 54 t
- West posted a three-point decline to 47.
Share of builders reducing home prices stopped trending down:
- As mortgage rates stayed above 7% over the last month, more builders are reducing home prices again to bolster sales.
- In September, 32% of builders reported cutting home prices, compared to 25% in August. That’s the largest share of builders cutting prices since December 2022 (35%).
- The average price discount remains at 6%. Meanwhile, 59% of builders provided sales incentives of all forms in September, more than any month since April 2023.
While more pricing-out is now occurring, the lack of resale inventory at the start of 2023 has shifted the new construction buyer mix. A special question in the September HMI survey revealed that 42% of new single-family home buyers were first-time buyers on a year-to-date basis in 2023. This is significantly higher than the 27% reading from a more normalized market in 2018.NAHB September Report
Given that shelter inflation accounts for roughly 40% of the Consumer Price Index, Dietz added: “Putting into place policies that will allow builders to increase the housing supply is the best remedy to ease the nation’s housing affordability crisis and curb shelter inflation. Shelter inflation posted a 7.3% year-over-year gain in August, compared to an overall 3.7% consumer inflation reading.”
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.
From The TradersCommunity News Desk