Sentiment among American homebuilders is hardly rising, despite price cuts

U.S. homebuilder confidence barely rose this month as they struggled to lure cautious buyers from the sidelines with costly sales incentives.

An index of market conditions from the National Association of Home Builders and Wells Fargo rose 1 point to 38 in November. A reading below 50 means more builders view conditions as bad than good. Economists consulted by Bloomberg estimate sentiment at 37.

In November, 41% of builders reported they had cut prices, a record in the post-Covid period, according to Tuesday’s report. More broadly, 65% reported using sales incentives, unchanged from the previous two months.

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Despite recent lower mortgage rates and lower prices, consumers are still concerned about the economy and the labor market. That’s what layoffs are pick up as hiring remains sluggish and the weakness in spending spreads from lower-income Americans to the middle class.

“We continue to see demand-side weakness as a weakening labor market and tight consumer finances contribute to a tough sales environment,” NAHB chief economist Robert Dietz said in a statement.

Data released earlier Tuesday showed U.S. companies 2,500 jobs will disappear on average per week in the four weeks ending Nov. 1, according to ADP Research. Job growth was likely tepid in September ahead of the government report expected on Thursday, which was delayed by the shutdown.

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Among the index’s components, sales expectations for the next six months fell 3 points, while current sales and potential buyer traffic numbers rose slightly. The group also said market uncertainty, exacerbated by the record-long government shutdown, played a role in limiting sentiment.

Despite the weak sentiment, builders are looking ahead to a better spring selling season, encouraged by mortgage rates hovering around a one-year low and some improvement in eliminating a housing oversupply, according to recent earnings data. They also gain an affordability advantage over resold homes, and the heavy discounting is likely to continue next year, Bloomberg Intelligence analyst Drew Reading said in an Oct. 29 note.

Nationwide, sentiment among builders rose to the highest level since April in the South, the largest U.S. homebuilding region, and in the West. Sentiment in the Northeast has fallen the most since February, while it fell less in the Midwest.

The National Association of Realtors will provide an update on the previously owned housing market Thursday when it announces October existing home sales.