Confidence among U.S. homebuilders held in November at a four-month low as buyer traffic and sales outlooks retreated.
The National Association of Home Builders/Wells Fargo builder sentiment gauge was unchanged at 54 from a revised October reading that was weaker than initially estimated, the Washington-based group reported today. The median forecast in a Bloomberg survey projected it would come in at 55. Readings above 50 mean more respondents reported good market conditions.
The 16-day partial government shutdown and political wrangling over the nation’s budget have taken a toll on consumer sentiment, causing some would-be buyers to delay spending decisions. Higher mortgage rates also are holding back gains in real estate, which has been a source of strength for the economic expansion.
“Policy and economic uncertainty is undermining consumer confidence,” David Crowe, chief economist at the builders association, said in a statement. “The fact that builder confidence remains above 50 is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline.”
Estimates in a Bloomberg survey of 51 economists ranged from 52 to 58 after a previously reported October reading of 55.
Two of three components of the builder survey deteriorated this month. The group’s measure of the sales outlook for the next six months declined to 60 from 61 in October, and prospective buyer traffic fell to 42 from 43. That put both measures at five-month lows. The gauge of current single-family home sales was unchanged at 58.
Builder confidence weakened in Midwest, was little changed in the South and West and improved in the Northeast.
Borrowing costs for homebuyers have climbed since May, with the average rate for a 30-year, fixed-rate mortgage at 4.35% for the week ended Nov. 14, up from 3.34% a year ago, according to Freddie Mac, in McLean, Virginia.
Nonetheless, affordability remains good and housing starts, which reached an annual rate of 891,000 in August compared with a record-low 478,000 pace in April 2009, still aren’t keeping up with population growth and household formation, said David Valiaveedan, vice president of finance at Red Bank, New Jersey- based Hovnanian Enterprises Inc.
“Not only are we severely under-producing the kind of 1.4 million average of the last cycle, but we’re way under-producing the long-term demand,” Valiaveedan said at a Nov. 14 conference. “We firmly believe we have a lot of runway ahead of us and a lot of opportunity.”
Hovnanian sells residential properties in 16 states including New York, California and Virginia.