The November NAHB home builder survey deteriorated further, falling to 33 from 38 and 3 pts below the estimate. This index has fallen every single month this year, is down by 36 pts over the past 6 months and is just 3 pts from matching the Covid low. Present conditions fell 6 pts m/o/m to 39 and the Future outlook was lower by 4 pts to 31. Prospective Buyers Traffic dropped another 5 pts to just 20 vs the Covid low of 13 and compares with the 71 level it stood as we entered 2022.
We’re now at the point of such faltering demand that the incentive push is really picking up. The NAHB said “To bring more buyers into the marketplace, 59% of the builders report using incentives, with a big increase in usage from September to November. For example, in November, 25% of builders say they are paying points for buyers, up from 13% in September. Mortgage rate buy-downs rose from 19% to 27% over the same time frame. And 37% of builders cut prices in November, up from 26% in September, with an average price of reduction of 6%.” This compares with the 10-12% price cuts in 2008.
Extending the problem for builders is the squeeze on profit margins, “Even as home prices moderate, building costs, labor and materials – particularly for concrete – have yet to follow.” As I said the other day, this is one of the risks for many companies in other industries that have been solely relying on inflation in driving sales, rather than volumes. The profit margin squeeze will continue.
NAHB
Prospective Buyers Traffic