Homebuilder confidence falls amid high mortgage rates

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The persistent rise in mortgage rates has cast a shadow over the housing market. A recent report from the National Association of Home Builders (NAHB) revealed that the index that tracks homebuilder confidence plunged 6 points in May — suggesting that homebuilders currently perceive the conditions for building as unfavorable in this higher-for-longer interest rate environment.

Yahoo Finance’s Dani Romero breaks down the details, discussing homebuilders’ steps to boost home sales and predictions for moderating home costs.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith and updated by Luke Carberry Mogan.

Video Transcript

Well, mortgage rates are averaging above 7% for the past four weeks.

According to Freddie Mac, high rates and high home prices are weighing on buyers and builders here.

With the latest on the housing sector, we’ve got our very own, Danny Romero, Danny, how are home builders reacting to mortgage rates right now?


Homebuilders are not feeling confident about the housing market, especially that mortgage rates have stayed above 7%.

The index that tracks homebuilder confidence came in at 45 points in May.

That is six points lower than the April’s figure, National Association of homebuilders reported.

Remember any number above 50 indicates that builders view conditions to be good rather than poor.

So this uh really highlights how builders and also um hope, you know, buyers are feeling right now in this higher for longer environment.

Now, one of the points that I wanna point out from this report is that 25% of builders actually cut home prices to boost sales up.

Another thing that was interesting was 59% of builders uh used incentives to also move some sales and inventory around Brad.

So rates remain elevated as we’re taking a look here on the screen at uh what about housing inflation?

What are we seeing there?

Brad shelter disinflation is on track according to experts and there are two points in the April’s inflation report that really highlight this first is rent came in at 0.3% month over month.

That was the smallest rise.

And also experts tell me that that really reflects and resembles uh the pre COVID days.

Another encouraging aspect from this report really is owner’s equivalent rent that is o that’s the hypothetical rent a homeowner would pay for the same property that remained unchanged at 0.4%.

But, but the fact that it has softened within the month is really encouraging.

Experts have been telling me so housing inflation has slowed from its peak of 8.2% a year ago, but yes, only to 5.5%.

But one economist from Oxford economics said it this way we have to be a little bit more patient than expected.

Especially that CP I lags real time rent data.


All right, Danny, thanks so much for breaking this down.

A lot of commentary specifically on Shelter.