NAHB Housing Market Index Fell for 12th Consecutive Month

NAHB housing market index fell to 31 in December (consensus 34) from 33 in November, the lowest level since mid-2012 with the exception of the spring of 2020. Forecasts were for a moderate rise to 34. Builder sentiment has declined every month in 2022. While a 30-year fixed is down to 6.42% from a peak of 7.16% according to the MBA it is still a long way from under 3% at the start of the year and inflation has been soaring to 40-year highs striking out affordability for many. More than 61% of the builders in the survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.

United States NAHB Housing Market Index

More housing data will be released tomorrow in the form of the latest Housing Starts and Building Permits reports.

US NAHB home builder sentiment September 2022

  • NAHB HMI 31 vs 34 expected Prior was 33
  • Current single-family home sales 36 vs 39 prior
  • Sales over the next six months 35 vs 31 prior
  • Index of prospective buyers 20 vs 20 prior

“In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “Our latest survey shows 62% of builders are using incentives to bolster sales, including providing mortgage rate buy-downs, paying points for buyers and offering price reductions. But with construction costs up more than 30% since inflation began to take off at the beginning of the year, there is little room for builders to cut prices. Only 35% of builders reduced homes prices in December, edging down from 36% in November. The average price reduction was 8%, up from 5% or 6% earlier in the year.”

Regional HMI Scores

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

  • Northeast fell five points to 37,
  • Midwest dropped four points to 34,
  • South fell six points to 36
  • West posted a three-point decline to 26.

Regionally, the sentiment was strongest in the Northeast and weakest in the West, where prices are highest. 

“The silver lining in this HMI report is that it is the smallest drop in the index in the past six months, indicating that we are possibly nearing the bottom of the cycle for builder sentiment,” said NAHB Chief Economist Robert Dietz. “Mortgage rates are down from above 7% in recent weeks to about 6.3% today, and for the first time since April, builders registered an increase in future sales expectations.”

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

From The TradersCommunity News Desk