US homebuilders’ confidence falls to its lowest since 2012
US homebuilders’ confidence fell to 29 in October, the lowest reading since June 2012. All three components of the NAHB/Wells Fargo survey weakened, while more builders cut prices and continued to offer sales incentives. The survey records companies’ assessments of new single-family housing conditions as higher borrowing and construction costs weigh on the sector.
Economics & Markets··Night
Confidence reaches a fourteen-year low
US homebuilders’ confidence fell 3 points to 29 in October, reaching its lowest reading since June 2012. The National Association of Home Builders, the US trade association known as NAHB, measures sentiment in the market for new single-family homes through its index with Wells Fargo. October’s decline follows a prolonged period of weak confidence.[1], [2]
The headline index has remained below 40 for 18 consecutive months. Readings below 50 mean that negative assessments outweigh positive ones among the builders surveyed. The October result describes their views of business conditions, rather than the number of houses sold or construction projects started during the month.[1]
Sales expectations and buyer traffic weaken
All three components declined. Current sales conditions fell 2 points to 33, while the measure of expected sales over the next six months dropped 5 points to 32. Prospective buyer traffic also lost 5 points, reaching 18. The sharper falls in expectations and traffic accompanied the deterioration in builders’ assessment of current sales.[1]
NAHB chairman Bill Owens attributed weaker buyer traffic to mortgage rates above 7 per cent in recent weeks and higher fuel prices. Builders also face higher construction loan, material and diesel costs, he said. These pressures featured in the association’s explanation of the October deterioration in housing market sentiment.[1]
More builders cut prices
The share of builders cutting prices rose to 43 per cent from September’s 38 per cent. Among those making cuts, the average reduction stayed at 6 per cent for a seventh consecutive month. Sales incentives were used by 65 per cent of builders, extending to 19 months the period in which at least 60 per cent offered them. Mortgage rate buydowns were among the support measures described.[1]
Regional readings also weakened on a three-month moving-average basis. The Northeast fell 1 point to 38, the Midwest declined 3 points to 40, the South slipped 1 point to 30 and the West lost 2 points to 26. Those regional figures smooth the survey across three months, whereas the national headline reports the October reading.[1]
