USA Today
Key Points
- Builder sentiment fell for the ninth straight month in September, according to the National Association of Home Builders
- Last week, mortgage rates exceeded six percent for the first time since late 2008 as August inflation report turned out to be worse than expected.
- On average, builders have reduced their prices by 6%, according to the NABH.
By many accounts, we are still in a seller’s market.
Home prices continue to rise in nearly all of the U.S. even as mortgage rates climb ever higher. Inventory levels – typically used by housing economists to gauge whether the market is favoring buyers or sellers – place the country squarely in a seller’s market.
But even with a mere 3.3 months’ supply of housing – about 5 to 6 months is considered balanced –homebuilders are struggling to sell homes. Builder sentiment fell for the ninth straight month in September, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Monday.
While inventory levels are low, the shortage is most acutely felt at the lower end of the price spectrum. Starter homes or entry-level homes – the most in-demand segment – are not being built at adequate levels.
According to the U.S Census Bureau, the share of new homes sold priced under $300,000 was 38% in 2020, 23% in 2021, and only 11% in the first seven months of 2022.
Jerry Howard, president and CEO of the National Association of Home Builders, told USA TODAY that focusing on the lower end of the price segment doesn’t make financial sense for builders.
According to the U.S Census Bureau, the share of new homes sold priced under $300,000 was 38% in 2020, 23% in 2021, and only 11% in the first seven months of 2022.
Jerry Howard, president and CEO of the National Association of Home Builders, told USA TODAY that focusing on the lower end of the price segment doesn’t make financial sense for builders.
Builder confidence in the market for newly built single-family homes fell three points in September to 46, the lowest level since May 2014 with the exception of the spring of 2020, according to the index.
“Right now, builders aren’t focused on any homes as best as I can tell we’ve slowed down completely,” says Howard.
Why is builder sentiment down?
Last week, mortgage rates exceeded 6% for the first time since late 2008 as the August inflation report turned out to be worse than expected.
since late 2008 as the August inflation report turned out to be worse than expected.
“2022 will see a decline, the first for a calendar year since 2011,” says Dietz. “The seasonally adjusted annual rate of single-family permits is now down 25% from its peak in February to the August reading.”
In July, newly constructed home sales were down nearly 30% from a year ago.
Existing home sales were also down 20% year over year in July. Builder confidence level is generally low.
“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating,” says 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.”
“2022 will see a decline, the first for a calendar year since 2011,” says Dietz. “The seasonally adjusted annual rate of single-family permits is now down 25% from its peak in February to the August reading.”
In July, newly constructed home sales were down nearly 30% from a year ago.
Existing home sales were also down 20% year over year in July. Builder confidence level is generally low.
“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating,” says 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.”