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Homebuilder confidence drops for ninth consecutive month

Yahoo Finance Live examines recent homebuilder data as housing markets show signs of cooling prices and a purchasing slowdown.

Video Transcript

- All right, to housing now, and stop me if you've heard this before, more data today showing a slowing housing sector. The print today from the National Association of Homebuilders, it shows sentiment dropping three points to 46 in September. Now, anything below 50 is considered negative.

And overall, it's again, the trend here, the ninth straight month of declines, as we continue to see a steady fall here, marking the lowest level since May 2014 with a notable exception being that plunge we saw at the beginning of the pandemic. And that's all we can compare it to right now.

Builder sentiment has really been cut in half this year, from 83 in January to that number, 46, today. And it's really a double-edged sword for the builders. They're paying more for materials, more for land, more for labor, as you know. And yet they're being forced to cut their prices. What do you think that does to inventory? They're all putting a lot of projects on hold, even freezing them midway.

Said NAHB Chairman Jerry Canter, quote, "Buying traffic is weak in many markets, as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households, the 30-year fixed north of 6%." Now, regionally, sentiment is down across the board, a really steep decline, though, in the West where prices rose the fastest. We talked about the three overall. It's 10% drop in the West to 41.

Also news today, Zillow's latest market report showing home values falling for the second straight month by 0.3% from July to August. And again, that doesn't sound like much. It is, however, the largest monthly decline since 2011, mortgage rates driving all of this again north of 6%, with the Fed set to raise rates by another 75 points. We will continue to see mortgage rates come up in the next couple of months and more people staying on the sideline. Nothing is going to improve this any time soon, unfortunately, Rachelle.

- I mean, you have to think, if you're a homeowner, you have literally zero incentive to sell right now. You've gained all this equity in your home. I mean, a lot of people are thinking instead about renting their houses out, making money that way, because you really are stuck between a rock and a hard place. For people who thought, look, let me rent for a while. Maybe prices will go down. The Fed is going to continue to raise rates. Those prices aren't going down. So they really are in a tough spot, Seana.

- Yeah, they certainly are. We also got data out from Opendoor today, which really points to the slowing trends that we have been seeing play out in the housing market. Opendoor, which is that home flipping site, saying there was a Bloomberg report that they lost money on 42% of their resales in August. That really puts things into perspective here just in terms of how big of a slowdown we are currently seeing in the housing sector right now.

A bit though of good news that I do want to end on, KeyBank actually double upgraded the homebuilder sector today to overweight, which is interesting timing, given, Dave, the sentiment that you were just talking about, the analysts there saying that homebuilders tend to rebound sooner and more sharply than the broader market.

So that's why we are seeing DR Horton, Lennar, PulteGroup moving to the upside, today even though that sentiment number was pretty concerning. But I don't think it's-- you can't really dispute the slowdown that we're seeing in the housing sector right now. I think the key question going forward is how significant of a slowdown we're going to see.

- We'll ask Mark Zandi about that later in the show. He'll have some great perspective.

- Yeah, it'd be great to get his thoughts on where things stand there.