Homebuilder developer confidence is hanging on by a thread after a troubling few months when the dice seemed loaded against them. New readings showed heightened market uncertainty, driven by the government shutdown, economic uncertainty caused by tariffs and rising construction costs.
The readings were revealed in the monthly builder survey conducted in November and published by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Data from the survey is used to calculate a seasonally adjusted index where a score of 50 or more indicates a positive outlook, while a score below that threshold indicates the opposite.
The nationwide HMI for November rose marginally from 37 to 38 and there was a two-point improvement in builders’ views on single-family sales from 39 to 41, as well as a slight improvement in traffic from potential homebuyers. However, the outlook for sales over the next six months turned sour, falling from 54 to 51 – the only index to hit 50 or above.
On a regional basis, the indexes for the Northeast and Midwest read negative, falling from 44 to 45, respectively. In contrast, the indices for the South and the West each rose by two points from October to November, climbing from 35 to 37 and from 31 to 33, respectively.
The glum outlook had developers scrabbling for solutions.
“More builders are using incentives to get deals closed, including lowering prices, but many potential buyers still remain on the fence,” commented NAHB chairman Buddy Hughes, himself a builder and developer from North Carolina.
As many as 41% of builders reported cutting prices in November – a record high post-Covid, and the first time since that this measure has exceeded 40%. The average home price was slashed by 6% in November, as it was in October and almost two-thirds (65%) of builders turned to sales incentives to improve their bottom line.
“We continue to see demand-side weakness as a softening labor market and stretched consumer finances are contributing to a difficult sales environment,” commented NAHB Chief Economist Robert Dietz.
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