New Home Builders Feel Pressure as Rates Continue to Rise

On a Scale of 1-100, 16 is Not Good

Homebuilder confidence is falling — a good sign for buyers of newly-built homes in and around Des Moines, Iowa.

According to the National Association of Homebuilders, the Housing Market Index slipped one point to 16 in April. It’s the 5th time in 6 months that the index read 16 — a figure exactly in line with the 1-year average, but still considered “poor”. The Housing Market Index reports on a scale of 1-100. They might consider it “poor”, but I would consider that horrible. Wouldn’t you?

In short, their values of 50 or better representing “favorable conditions”. Values below 50 are considered “unfavorable”.

It’s been 5 years since the Housing Market Index read north of 50.

As an index, the HMI is actually a composite of three separate surveys, the results of which can be as telling as the final, compiled results. The surveys focus on specific aspects about a homebuilder’s business, and use the broader responses to gauge overall market “sentiment”.

The 3 Questions Are:

How are market conditions for the sale of new homes today?
How are market conditions for the sale of new homes in 6 months?
How is prospective buyer foot traffic?

In April, interestingly, home builders felt market conditions were worse across the board, but still cited higher buyer foot traffic. This may be the result of a combination of rising mortgage rates and falling home values. Both tend to be bad for builders, and both tend to spur home buyers into action. Crazy how losing something will motivate you, right?

As a home buyer this spring, therefore, use the HMI data to your advantage. When home builders feel less confident on housing, buyers can often exact better concessions and/or upgrades during the negotiation process. If you’re currently in the process of buying a home and would like some help, I’d be happy for you to lean on me. You can email me at Tyler@TylerOsbyTeam.com and you can call me at 515-257-6729.