“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating,” the National Association of Home Builders said Monday.

Homebuilder sentiment fell further this month for the ninth month in a row, dropping to 46. This index goes from 0 to 100 and anything below 50 generally signals that the housing market is in decline. This decline comes two months after a “near record plunge” back in August, which came in second only to spring 2020 during COVID.

According to data released last week by the Mortgage Bankers Association, mortgage rates have now topped 6% for the first time since November 2008, and they are expected to get much worse over the coming months, as the Fed continues to raise interest rates to cut inflation, which is currently the highest in over 40 years.

“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week,” said NAHB Chairman Jerry Konter. 

“In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions,” he added.

Pantheon Macroeconomics analyst Ian Shepherdson expects the September sentiment numbers to fall even further and that we could see a sharp decline.

“Homebuilders’ sentiment tends to track the path of mortgage applications with a short lag,” he said “This probably will not mark the bottom of the cycle, given the latest surge in mortgage rates above 6%. The rate of fall of mortgage applications slowed over the summer, but the early September numbers point to a renewed sharp decline.”

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