Housing Bubble: Buyer Traffic and Homebuilder Confidence Plunge Faster than Expected

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Holy-moly mortgage rates of 7% slash demand for new houses due to super-inflated prices, but prices are now coming down.


Traffic of prospective buyers of new single-family houses plunged to the lowest since 2012, excluding the two lockdown months April and May, and is now approaching even the levels of those two lockdown months, according to data today from the National Association of Home Builders.

The NAHB index for traffic of prospective buyers dropped to 25, about where it was in mid-2007, well on the way down into Housing Bust 1. From 2008 through 2011, the index hovered around 10. Only this time, the descent is happening a lot faster than in 2005-2007:

Traffic is a sign of interest among potential homebuyers, but many of them lost interest amid still sky-high prices and holy-moly mortgage rates of around 7%. The response from homebuilders is to reduces prices and offer incentives (including mortgage-rate buydowns, anything to avoid the stigma of a price reduction).

With today’s index value of 38, the NAHB/Wells Fargo Housing Market Index is now nearly where it had been in May 2020 during the lockdown, and below where it had been in February 2007, on the way down into Housing Bust 1.

Current descent is much faster than during Housing Bust 1.

From April this year, when mortgage rates began to bite, until October, the index dropped by 39 points in six months (from 77 in April to 38 in October).

When Housing Bust 1 took off for homebuilders in October 2006 (index at 68), the index dropped in six months by 17 points. There was never any 6-month period during Housing Bust 1 when the index dropped anywhere near 39 points. The fastest drop was 24 points in the 6-month period that ended in September 2009.

The current 6-month drop now nearly matches the 6-month plunge through lockdown April 2020:



Continue reading this article at Wolf Street.


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