Builder sentiment decreased five points to 33 in November; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to cnbc.com. It reached a record high of 90 in November 2020.
The drop marks the 11th straight decline for the NAHB/Wells Fargo Housing Market Index. It also hit its lowest level since June 2012, except for a brief drop at the beginning of the COVID-19 pandemic.
Of the homebuilder index’s three components, current sales conditions fell six points to 39; sales expectations in the next six months decreased four points to 31; and buyer traffic fell five points to 20.
Mortgage rates are more than twice what they were at the beginning of 2022, and builders are having to offer potential buyers better deals; the NAHB said 59% of builders reported using incentives, which marks a significant increase from September to November. Twenty-five percent of builders reported paying points for buyers in November compared with 13% in September, and mortgage rate buy-downs rose from 19% to 27% during that same period. Additionally, 37% of builders cut prices in November compared with 26% in September.
“Even as home prices moderate, building costs, labor and materials—particularly for concrete—have yet to follow,” said NAHB Chief Economist Robert Dietz.