The NAHB reports Builder Confidence Falls for Eighth Consecutive Month
Key Points
- Builder confidence in the market for newly built single-family homes fell six points in August to 49, marking the first time since May 2020 that the index fell below the key break-even measure of 50.
- The August buyer traffic number in the builder survey was 32, the lowest level since April 2014 with the exception of the spring of 2020 when the pandemic first hit.
- Roughly one-in-five (19%) home builders in the HMI survey reported reducing prices in the past month to increase sales or limit cancellations. The median price reduction was 5% for those reporting using such incentives.
- Current sales conditions dropped seven points to 57, sales expectations in the next six months declined two points to 47 and traffic of prospective buyers fell five points to 32.
Diffusion Indexes
These are diffusion indexes, meaning direction is important more than magnitude. For example, a builder whose traffic is up one percent would balance out a builder whose traffic is down twenty percent.
Nonetheless, it’s easy to see the direction and understand the plunging traffic. Make that “should be easy”.
Bloomberg Econoday had this amusing note:
The housing market index crashed in July, tumbling 12 points for the single biggest decline on record. Forecasters see a 55 score for August that would match July.
Warning to readers! This index has missed Econoday’s consensus each and every report so far this year.
Average 30-Year Mortgage Rates
Although 20% of builders are cutting prices, I highly doubt 5 percent is going to entice many buyers given the surge in mortgage rates.
The 30-year mortgage rate is 5.33% today, down from over 6% in early June, but it is still up over 2 percentage points from a year ago.
Housing has peaked and it’s a long way down from here in terms of time and price.
Tomorrow we get August Housing Starts and on Thursday we will see Existing Home Sales. Expect both reports to be very weak.
This post originated on MishTalk.Com.
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Mish
I didn’t interpret this as heat index. At least not for the southwest where Temps easily exceed 120 in the summer. It isn’t a stretch to think 125 degreee summers will be routine in those places.
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