US ‘Housing Recession’ Rolls On As Sellers Lose Stranglehold

There’s “no sign” that America’s “housing recession” is abating.

That’s according to Robert Dietz, chief economist at the NAHB, who on Monday spoke in stark terms while editorializing around a ninth consecutive drop in a closely watched gauge of homebuilder sentiment.

The index has fallen every month this year (figure below), alongside a historic surge in mortgage rates, which have doubled from record lows.

September’s print, 46, was the lowest since May of 2020, following the first COVID lockdowns in the US. Outside of that anomalous episode, you need to travel all the way back to 2014 to find a comparable reading.

“Builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Fed that helped pushed mortgage rates above 6% last week,” Dietz went on to say, calling the market “soft” and noting that “more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.”

That’s all consistent with what I’ve variously insisted will be a nationwide decline in home prices. Over the weekend, I reiterated the basic premise behind my (still) out-of-consensus assessment that one way or another, property values are destined to fall.

NAHB’s measure of future single family sales ticked lower again this month (figure below).

Like the headline, it now sits at 46, matching the second-lowest reading since 2012.

Other gauges, including prospective buyer traffic, were similarly subdued. Or maybe “beset” is more apt.

I’d note that sentiment is now completely aligned with starts, or at least according to what the pedants among you will deride as a “naive” overlay chart (figure below).

Market watchers will get a look at August starts and permits on Tuesday, followed by existing home sales on Wednesday.

In the press release accompanying Monday’s data, the NAHB didn’t mince words. Affordability finally caught up to the market.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” NAHB Chairman Jerry Konter remarked. Almost a quarter of builders reported reducing home prices.

Last week, Redfin said months’ supply was almost 3 in the four weeks ended last Sunday. That figure was 1 a year ago.

“The housing market is becoming more balanced, but at a great cost to both buyers, who are footing the bill of high monthly mortgage payments, and sellers, whose stronghold on the market has slipped away as mortgage rates doubled this year,” Tim Ellis wrote.

Google searches for “homes for sale” are down 26% YoY.


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4 thoughts on “US ‘Housing Recession’ Rolls On As Sellers Lose Stranglehold

  1. In a few months we will probably start seeing home equity soften, Lowe’s and Home Depot sales will also be a good place to keep an eye on. I would think some labor will move from construction elsewhere

  2. It’s common sense that housing, which is a market that for a while has been a target market for investment wealth and a residence of inflation, has lost its shine and sellers have to work harder to peddle their properties. It seems like a fairly obvious place where the market would tighten. But then again, consensus is a place for collective opinion. Lowes and Home Depot will feel modest effects initially, maybe worsening over time. This is a sign that the Fed’s rate increases are having their desired effect on the housing market at least.

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