Its Builder Confidence Index has fallen every month this year.
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, according to National Association of Home Builders (NAHB) chairman Jerry Konter.
His comments in a prepared release come when builder sentiment fell for the ninth straight month in September as persistent building material supply chain disruptions plague the industry, according to the NAHB/Wells Fargo Housing Market Index (HMI) released yesterday.
The report also showed that 24% of builders reported reducing home prices that month, up from 19% in August.
“The housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week, the highest level since 2008,” said NAHB chief economist Robert Dietz.
Maybe This Cooling is ‘A Good Thing’
Greg Procopio, EVP at The Procopio Companies, tells GlobeSt.com that while there have been nine months of decline in HMI survey numbers, the current status puts the sector where it was April 2019.
“During COVID, construction was deemed essential work, while the mills and factories that produced all of our building materials and the ships and railways that transport the materials were shut down for months at a time,” he said. “This meant demand was there, supply was not. From this perspective, some cooling down is a good thing, as the supply chain needs time to catch up.
“The past two years saw an increase in land costs, material costs, labor rates, and demand for single-family housing, as people wanted more space. It’s very possible that single-family sales will decline as more and more people return to living in the urban environments that they fled during the pandemic.”
Many Will ‘Have to’ Rent Apts
Paul Rahimian, CEO and founder of Parkview Financial, a direct private lender specializing in ground-up commercial and residential real estate financing, tells GlobeSt.com that although lending costs have escalated recently, the multifamily market has remained strong as developers believe that many previous home buyers will no longer be able to buy homes with higher mortgage rates and will have to rent apartments.
“This will potentially lead to even more demand for multifamily projects,” Rahimian said. “There is also hope that construction costs could potentially decrease with slower overall demand, including the home building sector.”
Consumer Confidence Waning
Doug Ressler, YardiMatrix, tells GlobeSt.com that “economic growth is slowing, and consumer confidence is waning as the Federal Reserve has raised policy rates 150 basis points over the past two months in an effort to slow inflation. Another hike is expected this week.
“A weaker economy could cool gains, though apartment asking rents may not immediately respond to the Fed’s actions because rising mortgage rates have slowed the for-sale housing market. That might help demand for apartments as first-time homebuyers continue to rent and wait for a more opportune time to buy.”
GlobeSt.com
Comments