Nov. NAHB housing index drops, as affordability issues persist
Builders’ confidence in the market for new single-family homes fell as the National Association of Home Builders' housing market index dropped to 60 in November from 68 in October.
The last time the index was this low was when it was at 59 in August 2016. The previous time it fell this much was in February 2014 when it plunged to 46 from 56, according to the NAHB.
IFR's poll of economists predicted the index would be 67.
“Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” NAHB Chairman Randy Noel said.
“For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” according to NAHB Chief Economist Robert Dietz. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.”
With interest rates expected to rise, builders are more cautious, according to Dietz, yet policymakers are ignoring affordability issues.
“Recent policy statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low,” Dietz noted. “Given that housing leads the economy, policymakers need to focus more on residential market conditions.”
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
The current single-family home sales index declined to 67 from 74, the sales expectations index for the next six months plunged to 65 from 75; and the traffic of prospective buyers index slumped to 45 from 53.