by Calculated Risk on 11/16/2022 10:07:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 33, down from 35 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Declines for 11 Consecutive Months as Housing Weakness Continues

Elevated interest rates, stubbornly high building material costs and declining affordability conditions that are pushing more buyers to the sidelines continue to drag down builder sentiment.

Builder confidence in the market for newly built single-family homes posted its 11th straight monthly decline in November, dropping five points to 33, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the lowest confidence reading since June 2012, with the exception of the onset of the pandemic in the spring of 2020.

“Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “With the housing sector in a recession, the Biden administration and new Congress must turn their focus to policies that lower the cost of building and allow the nation’s home builders to expand housing production.”

To bring more buyers into the marketplace, 59% of builders report using incentives, with a big increase in usage from September to November. For example, in November, 25% of builders say they are paying points for buyers, up from 13% in September. Mortgage rate buy-downs rose from 19% to 27% over the same time frame. And 37% of builders cut prices in November, up from 26% in September, with an average price of reduction of 6%. This is still far below the 10%-12% price cuts seen during the Great Recession in 2008.”
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All three HMI components posted declines in November. Current sales conditions fell six points to 39, sales expectations in the next six months declined four points to 31 and traffic of prospective buyers fell five points to 20.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 41, the Midwest dropped two points to 38, the South fell seven points to 42 and the West posted a five-point decline to 29
emphasis added

Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was below the consensus forecast, and the lowest level since 2012 (excluding the two-month drop at the beginning of the pandemic). 

The "traffic of prospective buyers" is now well below breakeven at 20 (below 50).