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US housebuilder confidence slumps in November

By Michele Maatouk

Date: Monday 19 Nov 2018

US housebuilder confidence slumps in November

(Sharecast News) - Sentiment among US housebuilders deteriorated more than expected in November amid growing affordability concerns, according to data released on Monday.
The National Association of Home Builders/Wells Fargo housing market index fell eight points from October to 60, missing expectations for a much smaller drop to 67 but remaining in positive territory.

The component gauging current sales conditions declined seven points to 67, while the component measuring expectations over the next six months dropped 10 points to 65. Meanwhile, the gauge measuring buyer traffic fell eight points to 45.

According to the NAHB, builders have continued to see signs of consumer demand for new homes but customers are taking a pause due to concerns over rising interest rates and home prices.

NAHB chief economist Robert Dietz said: "For the past several years, shortages of labour and lots along with rising regulatory costs have led to a slow recovery in single-family construction. While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall. As a consequence, builders have adopted a more cautious approach to market conditions.

"The decline of builder confidence should be noted by policymakers. Recent statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low. Given that housing leads the economy, policymakers need to focus more on residential market conditions."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This looks horrible. The headline drop is the biggest in a single month since Feb 2014, and it seems straightforward to pin the blame on rising mortgage rates. To play devil's advocate, though, it's possible that hurricanes Florence and Michael have pushed in the index down, so a rebound in December can't be ruled out. It's certainly hard to see justification in the mortgage applications numbers for such a big drop in the index.

"Indeed, once the hurricane distortions fade from the new home sales numbers, we expect to see a clear rebound for the next few months, before the underlying softening trend re-emerges. The housing market is softening, but it is not melting down, and these data likely overdo the gloom."

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