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Homebuilders say higher mortgage rates are already affecting demand

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Texas Squeeze: A series investigating the high costs of high growth in North Texas.

Dallas / Fort Worth and homebuilders across the country are feeling the impact of this year’s significantly higher housing costs on community demand.

According to the National Association of Home Builders and the Wells Fargo Housing Market Index, builders’ confidence in the market for new US single-family homes fell by 8 points from April to May to 69. This is the lowest builder sentiment since June 2020.

index It is based on NAHB’s monthly survey over 35 years and measures the contractor’s perception of current home sales and sales expectations. Builders are still generally optimistic, as scores above 50 indicate that more buyers consider the condition better than bad.

The survey reported that builders experienced the lowest level of purchasing activity since July 2020.

The May index plunge is a sign that the housing market is slowing as rising interest rates, material costs and house prices hurt affordable prices, NAHB said.

“The housing market faces ever-increasing challenges,” said Robert Dietz, Chief Economist at NAHB. “Entry-level homebuyers and first-time homebuyers are bearing the brunt of this rapid rise in mortgage rates.”

In combination with House prices are already soaringThe rise in mortgage rates Greatly impacts the buyer’s budget Over the past few months.

30-year fixed rate mortgage average interest rate Reached 5% for the first time in more than 10 years During April. It was 5.25% as of May 19.

“These are the actual dollars that exacerbate the affordable crisis, and it’s time for many to stay on the sidelines between the rising costs of the house itself and the cost of borrowing money. I think it makes you feel like it isn’t, “said Phil Krone, executive officer of the Dallas Builders Association. “That’s not the way we want to cool this market. I wish we could supply the market with the housing we needed and cool the market it deserves.”

Dallas-based Residential Strategies Principal Ted Wilson sees builders declining traffic in the new housing community, but buyers who are still shopping are “very ambitious and qualified. “.

“Many people compare what’s happening now to when the market returned in 2008, and that’s a very different situation now,” Wilson said. “At that time, the quality of the traffic was pretty bad. Today’s traffic is still very good.”

According to Wilson, communities targeting first-time buyers can be more impacted by pricing than neighboring communities that are popular with people outside the state, and some communities are starting to offer discounts. It is said that there is.

Richard Costello, Chief Financial Officer of Plano-based GreenBrick Partners, said sales reps may need to dig deeper into the list of interested buyers. Income ratio. “

According to Costello, his company’s inventories are primarily in the high price range, helping to isolate the company from the effects of rising mortgage rates.

“We expect rising mortgage rates to have some impact on demand, but in the long run, demographic changes in very strong high-growth markets and record low existing housing inventories are healthy. We believe we will maintain the housing market, said James Brickman, CEO of Greenbrick, on the phone.

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