US home builder confidence drops to five-month low

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Confidence among home builders in the USA has dropped to a five-month low amid persistently high mortgage rates.

That’s according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), released yesterday (18 September).

The survey of home builders found that sentiment levels had dropped to below the break-even measure of 50 for the first time since April.

The NAHB blamed mortgage rates that have remained persistently above 7% for “eroding builder confidence”.

It also noted that more builders are reducing home prices to bolster sales.

In September, 32% of builders reported cutting home prices, compared to 25% in August. That’s the largest share of builders cutting prices since December 2022 (35%).

The average price discount remains at 6%. Meanwhile, 59% of builders provided sales incentives of all forms in September, more than any month since April 2023.

NAHB chief economist Robert Dietz said, “High mortgage rates are clearly taking a toll on builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase until long-term rates move lower.

“Putting into place policies that will allow builders to increase the housing supply is the best remedy to ease the nation’s housing affordability crisis and curb shelter inflation. Shelter inflation posted a 7.3% year-over-year gain in August, compared to an overall 3.7% consumer inflation reading.”