U.S. homebuilder confidence fell to a five-month low, citing supply and worker shortages amid rising material costs. Yahoo Finance Housing Reporter Dani Romero outlines how homebuilders are attempting to balance home prices in September by slashing prices.
SEANNA SMITH: Homebuilders are losing confidence. The National Association of Homebuilders index fell for a second month in a row in September, slipping to its lowest level since April. And now, the decline coming as mortgage rates remain above 7%. For more on this, I want to bring in Yahoo Finance reporter, Dani Romero. Dani.
DANI ROMERO: Seanna, homebuilders are not feeling so upbeat anymore. And the confidence dropped to the lowest level since April. That's what the National Association of Homebuilders reported. And this really reflects the uptick in rising mortgage rates, which have hovered around that 7% for about a month now, hindering affordability. Plus, the rising costs of material goods, labor. This is all weakening the enthusiasm that homebuilders had been feeling since the beginning of the year.
Another point to highlight is that the mortgage rate shock is really, really affecting homebuilders and causing them to slash home prices to boost some of those sales. 32% of homebuilders reported that they slashed home prices in September. The average discount was around 6%. Plus, 59% of Homebuilders offered some kind of incentive. That is more than any other month since April. Really highlighting that mortgage rates are taking a toll not only on homebuilders, but also on consumer demand, Seana.
BRAD SMITH: So what does this latest reading mean for first-time homebuyers?
DANI ROMERO: Builders have been riding so high, the fact that the resale market has been muted. So they've really refocused their attention on first-time homebuyers. And the NAHB reported that 42% of new single-family homebuyers year-to-date were first-time homebuyers. So that's really signaling who the new customer is for these homebuilders.
And that's also been something that not only have they been slashing home prices, offering incentives, those mortgage rate buydowns. Especially, they look really attractive when mortgage rates are hovering around that 7%. But it's really highlighting who the new customer is and it's that first-time homebuyer, that entry level homebuyer. Brad.
BRAD SMITH: This is significant here, a fall of five points during September, following a six-point drop in August. A huge reading and no doubt, going to catch the attention of some investors out there looking at this space in a week where we're also expecting some earnings from KB Homes as well. Thanks so much for joining us here this morning. Yahoo Finance reporter, Dani Romero. Thanks, Dani.