As Upton Sinclair once famously said:
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
But, after a couple of years of exuberant ignorance, home builders have finally started to face reality – or admit reality – slashing their optimism about the US housing market dramatically…
Against expectations of a 67 print, NAHB’s optimism index crash from 68 to 60 in November – its biggest drop since 2014 (to its lowest since Aug 2016) as the highest borrowing costs in eight years restrain demand, adding to signs of a cooling housing market.
Of course the ‘hard’ housing data has been collapsing for months…
The home builder index represents one of the first breaks in high levels of business and consumer confidence that have persisted since Trump was elected.
“Rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall,” NAHB Chief Economist Robert Dietz said in a statement accompanying the data.
“Given that housing leads the economy, policy makers need to focus more on residential market conditions.”
Under the covers, the NAHB sub-index measuring current sales fell seven points to 67, the lowest since August 2016, while the index for the six-month outlook for transactions dropped 10 points to 65, the lowest since May 2016. A measure of prospective buyer traffic declined eight points to 45, also the lowest since August 2016.
Optimism fell across all regions with The West and Northeast falling the most.