Growing affordability concerns caused builder confidence in the market for new single-family homes to fall eight points to a level of 60 in November, according to the NAHB/Wells Fargo Housing Market Index. Builders continue to report positive consumer demand for new homes, but more customers are expressing concerns over rising interest rates and home prices.
Mirroring this decline, Census data for October showed a 1.8% decline in single-family starts. While single-family construction is up 5.5% on a year-to-date basis, the pace of starts has declined for three months as affordability issues have weighed on the market. The NAHB/Wells Fargo Housing Opportunity Index, a quarterly measure of housing affordability, also declined during the third quarter. The data indicate that only 56% of new and existing home sales are affordable for a typical family, down from 58% a year ago. New home sales have also posted five consecutive months of declines.
Moreover, confidence in the multifamily market also fell in the third quarter. However, one market is recording strong performance: townhouse construction. Over the last four quarters, townhouse starts totaled 123,000, 24% higher than the previous four quarters. On a one-year moving average, the market share of new townhouses stands at 13.8% of all single-family starts, a post-recession high.
–NAHB Chief Economist Robert Dietz