Guess what? Unaffordable housing’s weighing on consumer psychology in America.
Imagine that: When shelter’s unattainable, people tend to be anxious.
Homebuyers (or I guess I should say aspiring homebuyers) continue to “report affordability challenges,” and that’s “contributing to declining consumer confidence for the overall economy,” Buddy Hughes said Tuesday.
Buddy, you’re reminded, is NAHB Chairman. He’s also a homebuilder in North Carolina. People like Buddy are feeling glum, consistent with the overall national mood. The NAHB’s gauge of builder sentiment slipped a second month in February to just 36, according to the first of this week’s US macro updates.
The figure above’s a stark reminder: This is a long-running malaise and it’s intractable.
Ostensibly, conditions favor buyers by the most in decades, and yet, outside of the preponderance of sellers, there’s nothing “favorable” about this environment: Mortgage rates, although down ~100bps from the post-pandemic peak, are still “high” by post-GFC standards and prices continue to rise even as the rate of price growth is now undershooting inflation.
Simply put: The math still doesn’t work for a lot of people, and that means builders are unable to clear inventory.
Note that the NAHB’s closely-watched measure of future sales has now erased a meaningful bump seen early in Q4. It now sits at the lowest since September.
Although a smaller share of builders resorted to price cuts this month versus January, the average size of those cuts, at 6%, was unchanged. When you consider the average cost of a new home in America, 6%’s a lot of margin.
The overall use of incentives was 65%. That’s high and as NAHB Chief Economist Robert Dietz noted, February marked “the 11th consecutive month” that metric exceeded 60%.
All of that for what? Not much, apparently. “While the majority of builders continue to deploy buyer incentives, including price cuts, many prospective buyers remain on the sidelines,” Dietz said.
If there’s a light at the end of this tunnel that’s not a train, it’ll have to be rates. As mentioned here, 10-year US yields are flirting with a three-handle. If the 30-year fixed can move below 6%, we might see more in the way of housing market thaw just in time for the spring buying season.
