October 4, 2023

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More homebuilders slash prices, sentiment drops for ninth straight month

More homebuilders slash prices, sentiment drops for ninth straight month

A worker walks on the roof of a new home under construction in Carlsbad, California.

Mike Blake | Reuters

More builders are lowering home prices as their confidence in the market continues to collapse.

Homebuilders’ sentiment in September slipped 3 points to 46 in the National Association of Home Builders/Wells Fargo Housing Market Index. Anything less than 50 is considered negative.

This is the ninth consecutive month of declines and the lowest since May 2014, except for a short-term decline in the beginning coronavirus pandemic In 2020. Sentiment was at 83 in January of this year, when interest rates were about half what they are now.

In fact, builders blame the price hike for their demoralization. The 30-year fixed-term average started around 3% this year and then started to rise steadily, topping 6% for a few days in June, according to daily mortgage news. Then it eased a bit and nearly reached 5% in August, before rising sharply again, back to more than 6% this month. This made the already expensive housing market even less expensive. The Federal Reserve, meanwhile, is It is expected to raise the benchmark interest rate again This week where inflation remains high.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to rising mortgage rates and home prices that are putting buying a new home out of reach for many families,” said Jerry Konter, NAHB Chairman. Savannah, Georgia.

Contter added that nearly a quarter of homebuilders reported lower home prices, up from 19% in August.

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Among the three components of the index, current sales conditions fell 3 points to 54, sales forecasts in the next six months fell 1 point to 46 and the movement of buyers fell 1 point to 31.

Builders continue to report rising construction costs, as well as higher interest rates affecting their markets. The high costs of land, labor and materials made it difficult for builders to cut prices, but they are now forced to.

“In this soft market, more than half of the builders in our survey reported using incentives to boost sales, including mortgage rate purchases, free amenities and price cuts,” said Robert Dietz, chief economist at NAHB.

On the three-month moving average, sentiment in the Northeast fell 5 points to 51 and also fell 5 points to 44 in the Midwest. In the South, it fell 7 points to 56, and in the West, where home prices rose, sentiment fell 10 points to 41.