U.S. home builder confidence weakened in November despite signs of easing mortgage rates that could bolster the outlook into the end of the year, according to a report released Thursday.
The National Association of Homebuilders’ index of builder confidence fell to 34 in November from 40 in October. The six-point fall is the fourth-straight drop in builder confidence, leaving the index at its lowest since December 2022.
Confidence could improve in coming months, however, as mortgage rates that peaked near 8% last month look poised to decline and credit conditions loosen across the economy.
"While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months," said NAHB Chief Economist Robert Dietz. "In particular, the 10-year Treasury rate moved back to the 4.5% range for the first time since late September, which will help bring mortgage rates close to or below 7.5%. Given the lack of existing home inventory, somewhat lower mortgage rates will price-in housing demand and likely set the stage for improved builder views of market conditions in December."
The average contract rate on a 30-year fixed-rate mortgage stood at 7.61% last week after climbing to as high as 7.9% in October, the highest in more than two decades, according to the Mortgage Bankers Association. A separate survey from Freddie Mac showed the average rate was down to 7.5% in the latest week.
As high rates cut into home affordability, homebuilders have slashed prices in an effort to attract buyers.
Homebuilder confidence rose during the first-half of the year as high mortgage rates and limited inventory of existing homes drew prospective homeowners to the new construction market. NAHB's buyer traffic index reached its peak in July at 40 and fell to 21 in November, the lowest since December 2022.
Amid weakening traffic, 36% of builders cut home prices in November, the highest share since November 2022. Builders based in the South and West reported the largest declines in sales conditions.
