The National Association of Home Builders ("NAHB") just released their November 2022 Builder Sentiment Figures and...woof.
They look really, really bad. To quote the NAHB directly:
Builder confidence in the market for newly built single-family homes posted its 11th straight monthly decline in November, dropping five points to 33, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the lowest confidence reading since June 2012, with the exception of the onset of the pandemic in the spring of 2020.
Worst Builder Confidence metrics since June 2012. Ouch. What's even more shocking is just how fast it's dropping. The November 2022 Sentiment Index of 33 is a massive 60% below the reading of one year ago.
BUT. There's an even more sinister data point hidden beneath the NAHB's Builder Sentiment Report. And that's in an oft-overlooked section called "Traffic of Prospective Buyers". This is measuring how many people are coming Builder Sales Offices to tour new homes, a leading indicator of sales in future months.
Buyer Traffic is down a stark 67% YoY. To an Index Level of 20. The last time it dropped this low, outside of the initial months of the pandemic, was in mid-2007. Right before the Biggest Housing Crash of all-time.
That's an ominous sign for the Housing Builders. Suggesting that the slow down (outright collapse?) in Buyer Demand in the second half of 2022 is going to continue well into 2023. And that we will see even more Price Cuts and Inventory pile up on the market.
This rock bottom Buyer Traffic could also signal the Home Builder Stock Prices are going to crash hard in 2023. Especially for big builders like DR Horton and Lennar. I just released a separate post analyzing why Home Builder Stocks look to be in a Big Bubble. Make sure to check that out if you want more insight.