According to the National Association of Home Builders (NAHB), homebuilder confidence stands at a reading of 46 in November, up 3 points from October's level. Realtor.com chief economist Danielle Hale joins Wealth to discuss the state of the housing market. Hale highlights a significant housing shortage, noting that the US housing market has been 2.5 million to 7 million homes short over the last decade. "We need to do a lot more building," she states. She anticipates potential relief within current building challenges like labor shortages, land constraints, and regulatory hurdles when the incoming Trump administration takes office. Regarding home affordability, Hale points out that builders are implementing strategies such as mortgage rate buydowns and various incentives to attract buyers. However, she names high mortgage rates as the "underlying" issue impacting housing affordability.
Home builder sentiment improved for a third straight month according to the National Association
of Home Builders. Confidence in the market for newly built single-family homes rose three
points in November to 46. This is according to NAHB Chairman Carl Harris. Builders are
expressing increasing confidence that a GOP sweep in Washington will result in regulatory
relief for the industry, leading to more construction. Here with more and reaction, we've got Danielle
Hale, who is the Chief Economist over at Realtor.com. Danielle, great to have you
back on the program with us. Is it as simple as that, or is there something else that's
also going to need to play out within this mix? And what are the anticipation for buyers
as well on the other side of the builder's calculus?
Thanks for having me, Brad. Yeah, I think what we've seen recently is that the new segment
of the homes-for-sale market has done relatively well compared to the existing segment. It's
been a bit more sluggish as a lot of homeowners are locked into low-rate mortgages. And so
builders have done a good job, but we've got a big deficit of homes that we haven't built
over the last decade. So Realtor.com estimates suggest we're between two and a half and seven
million homes short over the last decade. So we need to do a lot more building. Builders
have routinely cited things like regulation, land shortages, difficulty finding labor as
obstacles for building more homes. So maybe if the administration comes in, especially
with the benefit of a Congress that is of the same party, we might see a bit of a shake-up
and some of these things that have been roadblocks for builders start to move away.
And so with that in mind, are the costs associated with owning a home, do we see that in the
high tenor and, of course, the affordability, do we see that crisis easing a bit?
Yeah, it has been very expensive to buy a home. Interestingly, builders have been able
to offer incentives, in some cases reducing the price, in some cases doing things like
mortgage rate buy-downs, which has, in fact, softened new home prices even as existing
home prices have continued to go up. So it is helping a bit, but underlying all of this,
mortgage rates continue to be very close to recent highs. They're very close to 7% again,
which does create a headwind for home buyers and also for home sellers. So if we look at
the existing side of the market, the higher rates go up, the more locked in people are.
The lower rates come down, it's more affordable for buyers and for sellers to consider making
a trade instead of staying in their existing home.
Interesting. And what do you think that rate needs to come down to for us to see a wave
of demand of potential sellers listing their homes and people who are trying to refinance?
For that to become a reality.
You know, as we got closer to 6%, we did start to see a little bit more life in the new listings
coming to market. Actually, the existing home sales data that we're going to get later this
week will also reflect that time period of September when rates were very close to 6%.
So we might see a bit of a pickup. We saw a big pickup in pending home sales in the
recent data. So I think we'll see. But we do know that 84% of homeowners that have a
mortgage right now are locked in at a rate under 6%. So we're going to have to certainly
fall below 6% to meaningfully unlock a lot of those homeowners.
