Homebuilder confidence falls to 29, the lowest since June 2012
October's reading missed economists' forecast of 31 after the 30-year mortgage rate rose to 7.40% on Oct. 15 from 6.95% on Sept. 17, and 43% of builders cut prices, the highest share since 2020.
Key takeaways
U.S. homebuilder confidence fell to 29 in October, the lowest reading since June 2012, the National Association of Home Builders said Monday.
The NAHB/Wells Fargo Housing Market Index fell three points from September's 32. September's reading was down from 35 in August.
Economists polled by Reuters had expected 31. Any reading over 50 means more builders view conditions as good than poor.
Visits by people shopping for a new home, one part of that index, fell five points to 18, on that same scale.
"Housing remains squeezed by supply-side constraints and significant affordability challenges," said Robert Dietz, the association's chief economist. "Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines. As a result, buyer traffic has fallen to its lowest level since April 2012, excluding the pandemic's onset in April 2020."
The association said 43% of builders cut prices in October, the highest share since 2020. Builders who cut prices trimmed them by an average of 6%, the same reduction for a seventh straight month.
Sales incentives were in use at 65% of builders, the 19th straight month in which at least 60% reported using them.
"Mortgage rates have climbed well above 7% in recent weeks, and higher gas prices and inflation have further weakened buyer traffic across much of the country," said Bill Owens, the association's chairman and a home builder and remodeler from Worthington, Ohio.
Freddie Mac's weekly survey of U.S. mortgage rates put the average 30-year fixed rate at 7.40% on Oct. 15, up from 6.95% on Sept. 17, though unchanged from the week before.
Owens also said more than one-third of builders reported immigration enforcement in their markets over the past month, and that it delayed construction and kept legal workers off job sites.
The big builders were lower Monday morning on a day the broader market rose. By 10:58 a.m. ET, D.R. Horton was down 2.5%, PulteGroup was down 2.1% and Lennar was down 1.4%. The S&P 500 was up 0.6%.
The iShares U.S. Home Construction ETF, ITB, was down 1.4%. About 65% of the fund is homebuilding, and D.R. Horton alone is about 18%. Building products are about 17%, and home-improvement retail, including Home Depot and Lowe's, is about 10%.
D.R. Horton leads ITB by a wide margin
State Street SPDR S&P Homebuilders ETF, XHB, was down 0.6%. Its largest holdings are SharkNinja, Wayfair and Williams-Sonoma, not the big builders, and D.R. Horton is about 3%.
The U.S. Census Bureau is scheduled to release September building permits, housing starts and completions Tuesday at 8:30 a.m. ET. The National Association of Realtors is due at 10 a.m. ET the same day with September pending home sales.
Want more of our stories in Google’s Top Stories? Add etf.net as a preferred source on Google
ETFs in this story
Frequently asked questions
Why did homebuilder confidence fall?
Higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines, the association's chief economist said.
Did October's reading miss the forecast?
Economists polled by Reuters had expected 31, but the index fell to 29 from 32 in September.
How widespread are builder price cuts?
The association said 43% of builders cut prices in October, the highest share since 2020, by an average of 6%.
How did home-construction ETFs trade?
The iShares U.S. Home Construction ETF was down 1.4%, while State Street SPDR S&P Homebuilders ETF was down 0.6%.
