- Prior month 35
US homebuilder confidence weakened more than expected in September:
- NAHB Housing Market Index: 32 vs 34 expected. Prior 35
September components compared with August:
- Current sales conditions: 35 vs 39
- Sales expectations for the next six months: 37 vs 43
- Traffic of prospective buyers: 23 vs 23
Builder confidence in the market for newly built single-family homes fell three points to 32 in September, below the market estimate of 34 and down from 35 in August.
The details were also weak. The index measuring current sales conditions declined four points to 35, while expectations for sales over the next six months dropped six points to 37. Prospective-buyer traffic remained unchanged at a depressed 23.
Builders are increasingly turning to discounts and other incentives to generate demand. The share of builders cutting prices increased to 38% from 35% in August. The average price reduction remained at 6% for the sixth consecutive month.
Meanwhile, 66% of builders used sales incentives, up from 63% in August and the highest percentage since the 67% reading in December. That suggests affordability pressures and elevated borrowing costs continue to make it difficult for builders to convert prospective buyers into actual sales.
Quick analysis: This was a weaker-than-expected report, but the sharp drop in six-month sales expectations is arguably the most concerning detail. Builders are not only reporting soft current conditions; they are becoming less confident about the near-term outlook.
The increased use of price cuts and sales incentives is another sign that demand remains under pressure. Although discounting could eventually help improve affordability, it also suggests builders must work harder to attract buyers.
For markets, weaker housing data could marginally support a less hawkish Federal Reserve outlook and normally lean slightly negative for the US dollar and Treasury yields. However, the NAHB report is typically a secondary market mover, especially with the Fed rate decision approaching.
What this report measures: The National Association of Home Builders/Wells Fargo Housing Market Index is a monthly survey of single-family homebuilders. Builders assess current sales, expected sales over the next six months and traffic from prospective buyers.
The headline index ranges from zero to 100. A reading above 50 means more builders consider market conditions good than poor, while a reading below 50 indicates predominantly negative sentiment. The report is watched as an early indicator of housing demand, residential construction and the effects of mortgage rates on buyer affordability.
This article was written by Greg Michalowski at investinglive.com.