Homebuilder sentiment plunges in December for 12th straight month

Confidence among builders in the U.S. housing market unexpectedly fell in December to the lowest level in a decade as painfully high inflation and rising borrowing costs forced potential buyers to pull back.

The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, fell for the 12th consecutive month to 31, marking the worst stretch for the housing market since the survey launched in 1985.

The index has fallen to half of what it was just six months ago, when it stood at 76. It peaked at a 35-year high of 90 in November 2020, buoyed by record-low interest rates at the same time that American homebuyers – flush with cash and eager for more space during the pandemic – started flocking to the suburbs.

The interest rate-sensitive housing market has started to cool noticeably in recent months as the Federal Reserve moves to tighten policy at the fastest pace in three decades. Policymakers already approved six straight interest rate hikes, including four 75-basis-point increases in June, July, September and November, and have shown no sign of pausing as they try to crush stubbornly high inflation.

The average rate for a 30-year fixed mortgage fell to 6.31% last week, according to recent data from mortgage lender Freddie Mac. While that is significantly higher than just one year ago when rates stood at 3.12%, it's down from a peak of 7.08% notched in November.

With mortgage rates beginning to level off, there may be an end in sight for the decimation of homebuilder sentiment, according to NAHB chief economist Robert Dietz.

https://www.foxbusiness.com/economy/homebuilder-sentiment-plunges-december-twelfth-straight-month