The Real Estate Market is Clearly Losing Momentum

Homebuilder sentiment fell three points in September, the ninth straight month of declines. The index dropped to 49 from 52 in August, the lowest level since May 2014. Despite this, sentiment is still well above the 50-point threshold that would indicate a healthy housing market.

The decline was felt in most markets, including the Northeast and Midwest, where sentiment declined three points, while sentiment in the South dropped seven points to 57. Consumer sentiment declined as well in the West, where it fell 10 points to 41. The latest NAHB survey showed that despite the slump in consumer confidence, more homebuilders are lowering prices.

The sagging housing market has affected affordability in the United States. Increasing interest rates, persistent disruptions in the supply chain, and high home prices are making it more difficult for first-time buyers to afford new housing. The NAHB/Wells Fargo Housing Market Index (HMI) index, a gauge of builder sentiment, dropped three points in September, to 46. This is the lowest level since May 2014 and the first month of spring 2020. However, the reading is still higher than economists had predicted, with a level above 50 showing that builders see conditions as good.  But the market has to be concerned about the general direction.