Homebuilder confidence declines for eighth straight month amid rising mortgage rates

A new report from the National Association of Home Builders found that inflation and rising mortgage rates are behind the eighth consecutive dip in homebuilder confidence.

Video transcript

- We talked about a lot of sectors up. Real estate is certainly not one, and we'll get several key glimpses at the state of the slowing housing market this week. And first up, builder sentiment, dropping six points in August to 49, marking an eighth straight decline in the index.

Said National Association of Homebuilders chief economist Robert Dietz, quote, "Tighter monetary policy from the Fed and persistently elevated construction costs have brought on a housing recession." Seana, we'll also see housing starts, existing sales, and, of course, earnings from Home Depot and Lowe's, and do you expect any of that to be positive?

SEANA SMITH: I don't know. I think it's going to be a tough couple of quarters here, especially for some of those players like you just mentioned, Home Depot and Lowe's, directly tied to what we're seeing play out in housing. I think it's a little bit worrisome when we're starting to see these numbers that we have been over the last couple of months inside the Homebuilders Index.

We had Robert Shiller on the show just last month, and he was saying that the number one thing that he likes to look to in order to project a recession, or really get an overall sense of the housing market, is that buyer traffic number, which is included in the NAHB index. And that number dropped to 32-- putting that in perspective, the lowest level that we've seen since April 2014 outside of the first couple of months of the pandemic.

So certainly a worrisome sign here for the housing market-- we're expecting to see some cooling. But now I think there's a little bit of hesitation here, or concern, just what this means for the broader economy.

- There's some fear of a crash. I certainly don't see it--

SEANA SMITH: Yeah.

- --when talking to real estate experts and realtors across the country, although certainly a cooling. What you're seeing is, again, mortgage rates are 5.22. It sounds like a terrible number because it's more than twice what we were a year ago. But that's still a relatively low number when you consider perspective over the last 20 or 30 years.

But what you're seeing is so many people sit on the sidelines because they're well aware that prices continue to fall. But on the flip side, in all likelihood, that mortgage rate at 5.22 is going to continue to go up. So, ultimately, the price they pay for a house is going to continue.

So an interesting tidbit-- on Google searches, after we found out that negative GDP print for the second quarter, surged 2,000% for "sell my home fast"-- obviously, an all-time high in searches--

SEANA SMITH: Yeah.

- --for that search, so certainly a lot of signs of a cooling, hopefully not a crash.

SEANA SMITH: Yeah, we will see. Only time will tell about that. But I agree there certainly are some worrisome signs, although when you take a look and compare it, historically speaking, the housing market still looks pretty strong.