By Nathalie Voit
Homebuilder sentiment dropped for the fourth consecutive month as rising mortgage rates dampen demand for new and existing housing.
“The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices, and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” said the National Association of Home Builders (NAHB) Chief Economist Robert Dietz in a press release on April 18.
The average rate on a 30-year fixed mortgage as of April 18 is 5.25%, up from 3.90% at the start of March, according to Mortgage News Daily. This is the highest rate in over a decade. Year-to-date, rates have surged more than 1.9%, NAHB said.
Rapidly rising rates coupled with high construction costs and a red-hot housing market that shows no signs of potential cooling are taking a toll on builder confidence.
According to the National Association of Home Builders/Wells Fargo Housing Market Index, current market conditions for the sale of new homes fell 2 points to 85 in April. Sales expectations for the next six months increased 3 points to 73 after slipping 10 points in March. The component tracking buyer traffic posted a six-point decline to 60.
Overall, builder sentiment in the market for newly-built single-family homes slipped two points to 77 in April. This marks the fourth straight month of decline in homebuilder confidence.
“Despite low existing inventory, builders report sales traffic and current sales conditions have declined to their lowest points since last summer as a sharp jump in mortgage rates and persistent supply chain disruptions continue to unsettle the housing market,” said NAHB Chairman Jerry Konter in the release. “Policymakers must take proactive steps to fix supply chain issues that will reduce the cost of development, stem the rise in home prices and allow builders to increase production.”
According to the National Association of Realtors, the median U.S. home price rose 15% to $357,300 from one year ago in February as existing home sales fell 7.2%.
