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Homebuilder Sentiment Drops For The 12th Consecutive Month, But a Bottom May Be In Sight

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Homebuilder Sentiment Drops For The 12th Consecutive Month, But a Bottom May Be In Sight

(CTN News) – As a result, Homebuilder were less confident about their business in December, but they are beginning to see signs of life in the industry.

According to the National Association of Home Builders/Wells Fargo Housing Market Index released by the National Association of Home Builders and Wells Fargo, builder sentiment in the single-family housing market dropped 2 points to 31 in December.

As a rule of thumb, anything below 50 is considered negative.

In spite of a brief drop at the beginning of the Covid pandemic a few months ago, this is the 12th straight month of declines, the lowest reading since mid-2012. In the month of December last year, the index stood at 84 points.

There is a silver lining to this report of the HMI, however. It has the smallest drop in the index over the past six months.

This means we may be nearing the bottom of the cycle for builder sentiment, said Robert Dietz, the chief economist for the NAHB.

For the first time since April, builders have reported an increase in their expectations of future sales. This is despite mortgage rates down from over 7% in recent weeks to about 6.3% today.

It should be noted that the three components of the index fell 3 points each; current sales conditions fell to 36, buyer traffic remained at 20, and sales expectations in the next six months Homebuilder  increased by 4 points to 35.

In terms of regional sentiment, the Northeast had the strongest sentiment, while the West, where prices are higher, had the weakest sentiment.

The NAHB continues to attribute the problem to high mortgage rates, which despite the recent decline are still about twice what they were a year ago. This has resulted in a decline in affordability.

“In this high inflation, Homebuilder high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,” said NAHB Chairman Jerry Konter, a developer and builder from Savannah, Georgia.

62% of builders use incentives to boost sales, which include providing mortgage rate buy-downs, paying points to buyers, and reducing prices.

Although Konter noted that construction costs have increased by more than 30% since the beginning of this year, builders still have difficulty lowering prices.

Around 35% of builders reduced home prices in December, down from 36% in November. Prices Homebuilder  were reduced on average by 8%, up from 5% to 6% earlier in the year.

Considering the nationwide housing deficit of 1.5 million units and the easing of Fed Homebuilder monetary policy in 2024, NAHB anticipates weaker housing conditions in 2023 and a recovery in 2024,” Dietz concluded.

Who is the largest homebuilder in Texas?

Last month, Texas experienced close to a 2 percent month-over-month increase in new residential construction, resulting in approximately 7,655 new permits on record with HBW.

Texas Top Home Builders – February 2021.
Builder Total Permits
1-D.R. Horton 94
2-The Brohn Group 86
3-Lennar Homes 80
4-Pulte Homes 69

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Salman Ahmad is a seasoned writer for CTN News, bringing a wealth of experience and expertise to the platform. With a knack for concise yet impactful storytelling, he crafts articles that captivate readers and provide valuable insights. Ahmad's writing style strikes a balance between casual and professional, making complex topics accessible without compromising depth.

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