By Melissa Dittmann Tracey | REALTORMag
Even as demand for new homes fizzles—about a quarter of homebuilders are reducing their prices to attract more buyers as foot traffic falls—single-family construction jumped 3.4% in August, the Commerce Department reported Tuesday. Economists are calling it a “surprising bounce back” after five consecutive months of declines.
Still, builder sentiment fell in September to its lowest level since 2014, according to data from the National Association of Home Builders. Rising mortgage rates, which topped 6% last week, and construction delays due to supply chain disruptions are among builders’ top concerns, the NAHB’s report shows. More than half of builders surveyed say they are using incentives to bolster sales, including offering mortgage rate buydowns, free amenities and price reductions, according to the NAHB/Wells Fargo Housing Market Index.
Lawrence Yun, chief economist for the National Association of REALTORS®, lays the blame for the new-home market’s slump squarely on mortgage rates. “However, this month’s increase in housing starts implies that builders still see profit opportunities, even as they concede on prices,” Yun says. “Material prices, including for lumber, have been moderating, and fully completed homes are selling fast.” Unfinished homes that remain under construction are the ones sitting on the market for long periods, Yun adds.
