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November 22, 2018
Each month the National Association of Home Builders’ (NAHB) surveys builders nationwide to assess the health of the single-family home market. Respondents are asked to rate market conditions as they influence prospects for selling new homes today six months into the future, plus foot traffic of would-be buyers touring new homes on the market. The resulting gauge is called the Housing Market Index (HMI).
Steadily-rising home prices coupled with escalating mortgage interest rates caused confidence among U.S. homebuilders to slip in November from a score of 68 to 60. That means that 60 percent of builders have a favorable view of market conditions, compared to 40 percent expressing negative sentiment.
An index of 60 would normally be viewed unequivocally as favorable, however some industry watchers are more focused on the negative aspect of this latest report - the magnitude of the month-over-month change. That eight-point decline represents the steepest drop since 2014 and leaves the index at its lowest level since August, 2016. Market watchers are concerned that a downturn in new home sales could lead to lower sales of big-ticket items needed to fill those new homes.
Rising labor and material costs are contributing to advances in home prices. Labor rates are increasing as the rate of unemployment falls; and lumber prices are being affected by U.S. tariffs implemented earlier this year. At the same time, home loan rates are moving upwards as the Federal Reserve Board raises stays the course in slowly but steadily raising the Discount Rate. According to the MBA the average interest rate for 30-year fixed-rate mortgages reached a high not seen since 2010.
In October, mortgage applications for new homes numbered 2.1 percent fewer than year-ago according to a survey by the Mortgage Bankers Association (MBA). That downward trend continued into the first full week of November.
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