Builder Confidence Falls for the Ninth Month in a Row

Builder confidence fell for the ninth consecutive month in September, indicating that the housing market’s slowdown is continuing, as the combination of high-interest rates, persistent building material supply chain disruptions, and high home prices continue to weigh on affordability.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today, 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.

“Buyer traffic is low in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that put a new home purchase out of reach for many households,” said NAHB Chairman Jerry Konter, a Savannah, Ga.-based home builder and developer.

“Another sign of a weakening market is that 24% of builders reported lowering home prices, up from 19% last month.”

“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating,” said NAHB Chief Economist Robert Dietz.

“Builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve, which helped push mortgage rates above 6% last week, the highest level since 2008. In this soft market, more than half of the builders we surveyed said they used incentives to boost sales, such as mortgage rate buydowns, free amenities, and price reductions.”

The NAHB/Wells Fargo HMI is based on a monthly survey that NAHB has been conducting for more than 35 years and assesses builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.”

Builders are also asked to rate prospective buyer traffic as “high to very high,” “average,” or “low to very low” in the survey. The scores for each component are then used to calculate a seasonally adjusted index, with any number greater than 50 indicating that more builders consider conditions to be good rather than poor.

In September, all three HMI components fell. Current sales conditions fell three points to 54, sales expectations for the next six months fell one point to 46, and prospective buyer traffic fell one point to 31.

In terms of three-month moving averages for regional HMI scores, the Northeast dropped five points to 51, the Midwest dropped five points to 44, the South dropped seven points to 56, and the West dropped ten points to 41.