|Home: Global Wood||Industry News & Markets|
U.S. Builder Confidence Low, but
Improvements in View
High mortgage rates that approached 8 percent earlier this month continue to hammer builder confidence, but recent economic data suggest housing conditions may improve in the coming months.
Builder confidence in the market for newly built single-family homes in November fell six points to 34 in November, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the fourth consecutive monthly drop in builder confidence, as sentiment levels have declined 22 points since July and are at their lowest level since December 2022. Also of note, nearly the entire HMI data for November was collected before the latest Consumer Price Index was released and showed that inflation is moderating.
¡°The rise in interest rates since the end of August has dampened builder views of market conditions, as a large number of prospective buyers were priced out of the market,¡± said NAHB Chairman Alicia Huey, a custom home builder and developer. ¡°Moreover, higher short-term interest rates have increased the cost of financing for home builders and land developers, adding another headwind for housing supply in a market low on resale inventory. While the Federal Reserve is fighting inflation, state and local policymakers could also help by reducing the regulatory burdens on the cost of land development and home building, thereby allowing more attainable housing supply to the market.¡±
¡°While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,¡± said NAHB Chief Economist Robert Dietz. ¡°In particular, the 10-year Treasury rate moved back to the 4.5 percent range for the first time since late September, which will help bring mortgage rates close to or below 7.5 percent. Given the lack of existing home inventory, somewhat lower mortgage rates will price-in housing demand and likely set the stage for improved builder views of market conditions in December.¡±
NAHB is forecasting approximately a 5 percent increase for single-family starts in 2024 as financial conditions ease with improving inflation data in the months ahead.