U.S. homebuilder sentiment fell every month in 2022, sinking in December to a level not seen in over a decade outside of the pandemic amid elevated mortgage rates and high construction costs.
The National Association of Home Builders/Wells Fargo gauge dropped 2 points this month to 31, the lowest level since June 2012 excluding the onset of the Covid-19 pandemic, figures showed Monday. The uninterrupted slide this entire year represents the longest stretch on record.
The rapid climb in mortgage rates this year — a result of the Federal Reserve’s aggressive inflation-fighting campaign — crushed buyer demand for homes. At the same time, higher costs for materials and labor have made it more expensive to build. The combination has weighed on builder sentiment and new construction.
The latest survey shows 62% of builders are using incentives like mortgage rate buy-downs and paying points for buyers to try to boost sales, but demand remains subdued. The group’s measure of present sales decreased, matching the lowest level since mid-2012, while a gauge of prospective buyer traffic remained weak.
The outlook looks somewhat less bleak as sales expectations for the next six months rose for the first time since April. Nonetheless, the gauge remains extremely depressed, matching the second-lowest reading in a decade.
“NAHB is expecting weaker housing conditions to persist in 2023,” Robert Dietz, NAHB chief economist, said in a statement. “We forecast a recovery coming in 2024, given the existing nationwide housing deficit of 1.5 million units and future, lower mortgage rates anticipated with the Fed easing monetary policy in 2024.”
By region, builder sentiment remained low, with some improvement in the South.
A slew of other housing data will be released this week, including housing starts and new- and existing-home sales.