For the first time in 17 months, the average home is selling for less than list price, but high mortgage rates are still impacting what people can afford.
Builders’ confidence in the US housing market fell more than expected in September to its lowest level since the start of the COVID-19 pandemic, as painfully high inflation and rising borrowing costs forced potential buyers to back off.
The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, fell for the ninth straight month to 46, making the housing market the worst since the 2008 financial crisis.
Any reading above 50 is considered positive; before this year, the meter has not entered negative territory since a brief – but steep – drop in May 2020.
The index has fallen significantly from just a year ago when it stood at 76. It hit its 35-year high of 90 in November 2020, bolstered by record-low interest rates at the same time as U.S. homebuyers — awash with cash and eager for more space during the pandemic — flocked to the suburbs.
INFLATION INCREASED FASTER THAN EXPECTED IN AUGUST, AND PRICES KEEP PAINFULLY HIGH
On August 17, 2022 in Chicago, Illinois, a house is under construction in the Logan Square neighborhood. ((Photo by Scott Olson/Getty Images) / Getty Images)
“In 2022, sentiment among builders has declined every month,” said NAHB chief economist Robert Dietz. And the housing recession shows no signs of abating as builders continue to struggle with high construction costs and aggressive monetary policy from the Federal Reserve.
September’s reading was lower than economists’ average expectation for a drop to 47 from last month’s record of 48.
BILLIONAIRE DAVID RUBENSTEIN WARNS INFLATION WILL BE ‘DIFFICULT’ FOR THE FED TO REDUCE
The interest-rate-sensitive housing market has cooled considerably in recent months due to the Federal Reserve steps to tighten policy at the fastest pace in three decades. Policymakers already approved a 75 basis point rate hike in both June and July and are expected to approve another hike at the end of their two-day meeting this week.
A view of homes in a neighborhood in Los Angeles, California, on July 5, 2022. – While two years of a booming U.S. housing market brought wealth to many, a housing shortage makes owning a home priceless for millions of Americans ((Photo by FREDERIC J. BROWN/AFP via Getty Images) / Getty Images)
According to recent data from mortgage lender Freddie Mac, the average rate for a 30-year fixed-rate mortgage rose to 6.02% for the week ending September 15. That is considerably higher than a year ago, when the interest rate was still 2.86%.
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