Homebuilder morale extends from recession as mortgage rates soar

Homebuilder morale extends from recession as mortgage rates soar

Homebuilders’ morale, in the midst of its longest decline in four decades, fell further against this month as mortgage rates soared to levels last seen during the 2008 housing crisis.

The National Association of Homebuilders/Wells Fargo Housing Market’s building sentiment index fell to 46 this month, well below the 50 mark generally pointing to growth and extending a nine-month straight decline to a record survey, the longest losing streak since 1985.

Data from the Mortgage Bankers Association last week showed that interest rates on a 30-year fixed loan exceeded 6% for the first time since November 2008, and mortgage rates have risen about 4% so far this year, adding nearly $389,000 in interest. Lifetime rate payments for a $500,000 home.

New supply shortages are adding to the pressure as well, with US housing starts hitting a one-and-a-half year low in July, thanks in part to higher mortgage rates and rising construction costs.

β€œBuilding sentiment has plummeted every month in 2022, and the housing slump shows no signs of abating as builders continue to face rising construction costs and strong monetary policy from the Federal Reserve that helped push mortgage rates above 6% last week,” he said. Jerry Konter, President of the NAHB.

“In this soft market, more than half of the builders in our survey reported using incentives to boost sales, including mortgage rate purchases, free utilities and price cuts,” he added.

MBA data released last week showed that the seasonally adjusted purchase index, which tracks mortgage applications to purchase a single-family home, rose only 0.2% as buyers retreated from new transactions amid rising borrowing costs, meanwhile, new applications were up 1.2%. .

Pantheon Macroeconomic Analyst Ian Shepherdson believes that the September sentiment numbers are likely to fall further.

β€œHome builder sentiment tends to follow the path of mortgage applications with a short interval,” he said, β€œthat likely won’t mark the end of the cycle, given the recent rise in mortgage rates above 6%. The rate of decline in mortgage applications slowed over the summer, but the numbers in early September indicate a resumption of the sharp decline.”

Later this week, investors will also focus on a major set of numbers from the rapidly weakening housing market, with data on housing starts and building permits for August at 8:30 a.m. ET on Tuesday, and existing home sales data following in the same The time is Wednesday.

July Quarter Earnings From Home Builders Lennar (flexible) The main KB (KBH) It is also expected on Wednesday before the start of trading.

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