Homebuilder Sentiment Falls for Ninth Month, Consumer Confidence Rises
Homebuilder Sentiment Falls for Ninth Month
Dwindling housing affordability, elevated interest rates and supply chain disruptions have combined to keep homebuilder confidence heading lower for the ninth straight month, according to a prominent industry trade group.
The National Association of Home Builders said Monday that builder confidence in the market for new single-family homes fell three points in its September survey to 46. Numbers below 50 generally denote a negative outlook, and the latest number is the lowest registered since 2014, with the exception of the spring of 2020 in the pandemic’s early months.
“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” Jerry Konter, chairman of the Washington, D.C.-based homebuilders group, said in a statement.
“In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month,” Konter said.
The government-sponsored lending agency Freddie Mac reported last week that 30-year mortgage rates pushed past 6% for the first time since 2008. The escalation is expected to continue as the Federal Reserve looks to tame inflation by raising its own key lending rate.
While moderating home prices can help with affordability in some regions, analysts have noted that anything that reduces the pace of new construction can raise housing costs in the long run by limiting supply. This can affect multifamily demand by keeping prospective buyers in the rental pool.
Consumer Confidence Rises
Preliminary data from a closely watched monthly survey shows U.S. consumer sentiment rose to a five-month high this month, though there is lingering concern over historically high prices.
The University of Michigan reported that its consumer sentiment index reached 59.5 for September, ahead of August’s 58.2 but just short of researchers’ forecast of 60. Numbers above 50 generally suggest consumer sentiment is trending positive. The university is set to release final September numbers later this month.
Encouraged by declining energy prices, consumers projected annual inflation will be at a median 4.6% a year from now, compared with the current actual rate of 8.3%. That is the lowest median year-ahead projection by consumers of the past year.
“However, it is unclear if these improvements will persist, as consumers continued to exhibit substantial uncertainty over the future trajectory of prices,” Joanne Hsu, the university’s director of consumer surveys, said in a statement last week. Uncertainty over short-run inflation reached levels last seen in 1982, and uncertainty over long-run inflation is now well above levels seen last September, Hsu said.