Homebuilders’ confidence in the housing market continued its decline this month amid rising interest rates, high material costs and deteriorating housing affordability, according to data released Wednesday by the National Association of Home Builders.
The NAHB/Wells Fargo Housing Market Index found that homebuilder confidence in the market for newly built single-family homes fell for the 11th straight month in November, reaching its lowest level in a decade.
“Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce,” NAHB Chairman Jerry Konter said in a media release.
“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.”
The Federal Reserve’s series of jumbo interest rate hikes have sent mortgage rates soaring and further limited already tight purchase power.
These higher mortgage rates are driving up payments, and recent data shows that average monthly mortgage payments have risen by nearly 50 percent from pre-pandemic levels, according to data released earlier this month by the National Association of Realtors.
Average monthly payments have increased by more than $600, bringing the monthly payment on a typical single-family home to $1,840 after a 20 percent down payment.
Yet the index found that homebuilders are looking for ways to encourage more buyers to enter the market, with 37 percent saying they have cut prices. Overall, 59 percent of homebuilders said they are using some sort of incentive.
Still, NAHB Chief Economist Robert Dietz said policymakers must undertake a larger effort to ensure a greater supply of affordable housing.
“To ease the worsening housing affordability crisis, policymakers must seek solutions that create more affordable and attainable housing,” Dietz said.
“With inflation showing signs of moderating, this includes a reduction in the pace of the Federal Reserve’s rate hikes and reducing regulatory costs associated with land development and home construction,” he concluded.