Concerns about affordability of newly built single-family homes lowered the confidence of builders during November, according to the latest National Association of Home Builders(NAHB)/Wells Fargo Housing Market Index (HMI).
The HMI dropped eight points in November to 60, as housing affordability hit a 10-year low.
“Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” NAHB Chairman Randy Noel said in a release.
“For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” NAHB Chief Economist Robert Dietz said. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.”
Dietz said that builders have adopted a more cautious approach to market conditions and urged policymakers to take note.
“Recent policy statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low,” Dietz added. “Given that housing leads the economy, policymakers need to focus more on residential market conditions.”
According to the HMI, the index measuring current sales conditions declined seven points to 67 in November; the component gauging expectations in the next six months dropped 10 points to 65; and the metric charting buyer traffic registered an eight-point drop to 45.
Regionally, the Northeast rose two points to 58; the Midwest dropped one point to 57; the South dropped two points to 68; and the West decreased three points to 71.