Homebuilder sentiment drops to half of what it was six months ago

Homebuilder sentiment for single-family homes has fallen to half what it was just six months ago.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which gauges market conditions, fell 8 points to 38 in October from the previous month. That is down from 84 in December 2021 and 67 in June 2022.

With the exception of a brief drop in spring 2020 due to the pandemic, this is the lowest level since 2012. This past August this index dropped below 50 for the first time since May 2020. Anything below 50 in this index means that homebuilders have a negative sentiment for the housing market over the next six months.

“High mortgage rates … have significantly weakened demand, particularly for first-time and first-generation prospective home buyers,” said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia. “This situation is unhealthy and unsustainable.”

On a three-month moving average, the sentiment score in the Northeast fell 3 points to 48. In the Midwest it dropped 3 points to 41. In the South it fell 7 points to 49 and in the West declined 7 points to 34.

Due to rapidly rising interest rates, further slowdown in the housing market is expected for 2023.

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