U.S. homebuilder confidence slid every month this year, a new report showed, as sales tumbled in Las Vegas and around the country and buyers faced “deteriorating affordability.”
Builder confidence in the market for new single-family homes dropped for the 12th consecutive month in December, the National Association of Home Builders reported Monday. In a news release, the industry group cited high mortgage rates, elevated construction costs and “flagging consumer demand due to deteriorating affordability conditions,” all of which “dragged builder sentiment down every month in 2022.”
Its latest survey showed 62 percent of builders were using incentives, including price cuts, to bolster sales, Chairman Jerry Konter said in the release.
“In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,” he said.
Robert Dietz, the association’s chief economist, noted that mortgage rates have ticked lower in recent weeks, but the group still expects “weaker housing conditions to persist” next year.
Locally and nationally, homebuyers have been largely pumping the brakes for months, following last year’s cheap-money-fueled buying binge. The Federal Reserve has raised interest rates multiple times this year in a bid to fight inflation, and the jump in borrowing costs has sparked fewer home sales.
In Southern Nevada, sales have fallen sharply from year-ago levels, sellers have increasingly slashed their prices, and builders have offered more incentives to buyers and higher commissions to agents who bring them in.
Builders logged 350 net sales — newly signed purchase contracts minus cancellations — in Southern Nevada in October, down 59 percent from the same month last year, Las Vegas-based Home Builders Research reported.
Builders also pulled 545 new-home permits in October, down 55 percent year-over-year, indicating a sharp drop in construction plans, and their land buying was “basically non-existent,” wrote Andrew Smith, the research firm’s president.
Nationally, the pace of builders’ home sales dropped month-to-month several times this year, though in October, it was up 7.5 percent from September but still down 5.8 percent from a year earlier, federal data shows.
Touchstone Living founder Tom McCormick, whose Las Vegas homebuilding firm targets first-time buyers, told the Review-Journal late last month that Southern Nevada’s market is “much slower,” and buyer traffic has dropped off from last year’s levels.
Many people can’t qualify for a mortgage, as they can’t afford the higher payments brought on by rising interest rates, he indicated.
“Our buyers are definitely feeling it,” McCormick said.
As of last week, the average rate on a 30-year mortgage was 6.31 percent, down from 7.08 percent more than a month ago but still up from 3.12 percent a year ago, federal data shows.
“The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand,” Sam Khater, chief economist with mortgage buyer Freddie Mac, said in a news release last week. “The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”