A contractor uses a hammer while working on a townhouse under construction at the PulteGroup Metro housing development in Milpitas, California.
David Paul Morris | Bloomberg | Getty Images
Sharply high mortgage rates are casting a shadow over the country’s homebuilders, as expensive new construction is already becoming less expensive.
Construction confidence in the new single-family home market slipped two points to 77 in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Any reading above 50 is considered positive sentiment, but the reading marks the fourth consecutive month of decline for the index, which reached 83 in April 2021.
Among the three components of the index, current sales conditions fell by 2 points to 85. The movement of buyers fell 6 points to 60, and sales forecasts for the next six months increased 3 points to 73 after a 10 point drop in March.
Jerry Kunter, Chairman of NAHB, said: “Despite the current inventory drop, builders have reported sales movement and current sales conditions have fallen to their lowest levels since last summer, as the sharp jump in mortgage rates and ongoing supply chain disruptions continue to destabilize the market. housing”. Builder and developer from Savannah, Georgia.
The average 30-year fixed-rate mortgage rate was around 3.90% at the beginning of March and is now up to 5.15%, according to Daily Mortgage News. This is the highest rate in more than a decade. The rate loosely follows the 10-year US Treasury yield, which has been on the rise, but is also influenced by the Fed’s withdrawal from the mortgage-backed bond market.
High mortgage rates only exacerbate the high prices of both new and existing homes. The median price of a newly built home in February was up more than 10% over the previous year.
“The housing market is facing an inflection point as the unexpectedly rapid rise in interest rates, rising home prices and escalating material costs have significantly reduced housing affordability conditions, particularly in the critical entry market,” said NAHB Chief Economist Robert Dietz.
Regionally, on the three-month moving average, building sentiment in the Northeast rose 1 point to a reading of 72. In the Midwest it decreased by 3 points to 69, in the South it decreased by 2 points to 82 and in the West it decreased by 1 point to 89.