December’s National Association of Home Builders Housing Market Index reported slipping builder confidence in U.S. housing markets. The Housing Market Index readings fell every month in 2022. Recently rising mortgage rates, materials costs, and inclement winter weather contributed to builder skepticism about current housing market conditions.
December’s National Housing Market Index reading of 31 was the lowest since mid-2012 not including readings published during the pandemic. By comparison, the Housing Market Index reading for December 2021 was 84. The three indices comprising the Housing Market Index reported mixed readings in December. Current home sales decreased by three points and home builder expectations for home sales in the next six months increased by four points. Builder expectations of buyer traffic in new housing developments were unchanged from November’s reading.
Regional housing market indices reported mixed index readings, which are seasonally adjusted. The Northeast region reported an index reading of 32 for December, which was unchanged from November. The Midwestern region had an index reading of 30 for December, which was five points lower than November’s reading. The South reported an index reading of 35, which was two points higher than in November. The West reported an index reading of 25 for December, which was three points lower than in November.
Mortgage rates recently fell below seven percent and the pace of home price growth is slowing. High home prices and rapidly rising mortgage rates led more than 60 percent of home builders to offer a variety of buyer incentives including mortgage rate buydowns and paying discount points charged to home buyers for lower mortgage rates.
Building affordable homes: The struggle is real
NAHB home builders expect weaker housing market conditions to continue through 2023 with full recovery starting in 2024. NAHB estimates that there is a shortage of 1.5 million new homes based on buyer demand and homes currently available. Jerry Konter, the chair of NAHB, said that home builders are struggling to keep housing affordable. Construction costs rose by 30 percent since the start of 2022 and there is little room for home builders to cut home prices.
Slower home price growth and lower mortgage rates will help prospective home buyers qualify for mortgages and encourage more buyers to enter the housing market.Share
About the Author:Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.