U.S. homebuilder confidence fell for a second month in September, with optimism dropping to the lowest since April as high interest rates cut into affordability for prospective buyers.
The National Association of Home Builders/Wells Fargo homebuilder sentiment index fell to 45 this month from a reading of 50 in August, when builder sentiment had fallen for the first time since December. The fall in optimism was accompanied by a decrease of traffic of prospective buyers.
Confidence was below a Reuters poll showing the median expectation among economists was for a reading of 50.
“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, chief economist at the NAHB. “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.”
With homeowners discouraged from selling due to higher interest rates, the homebuilder market had shown signs of recovering during the first half of 2023 as demand for new home construction increased. The latest data, though, suggest that recovery has faltered.
Since the Federal Reserve began hiking interest rates in March 2022, mortgage rates have risen, and have held above 7% since early August, the highest level since 2002.
Sales expectations among builders fell in September amid lower pricing, with the six-month outlook for home sales falling to 49 from 55 the month prior. Thirty-two percent of builders cut prices in September, the highest since December 2022.
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