Builder sentiment dropped six points to 34 in November—the lowest level in a year; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to CNBC. It reached a record high of 90 in November 2020.
All three components of the homebuilder index declined, with current sales conditions dropping six points to 40; sales expectations in the next six months decreasing five points to 39; and buyer traffic falling five points to 21.
However, falling interest rates could lead to optimism.
“While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,” said NAHB Chief Economist Robert Dietz.
“In particular, the 10-year Treasury rate moved back to the 4.5% range for the first time since late September, which will help bring mortgage rates close to or below 7.5%,” Dietz continued. “Given the lack of existing home inventory, somewhat lower mortgage rates will price in housing demand and likely set the stage for improved builder views of market conditions in December.”
Thirty-six percent of builders reported cutting prices in November, which is up from 32% in October. The average price discount is holding at 6%.