Home sales in the U.S. are hitting a sour note, as rising mortgage rates and continued home price growth are hurting affordability and fast becoming a toxic cocktail for the nation's home builders.
The National Association of Home Builders/Wells Fargo Housing Market Index shows sentiment among home builders dropped eight points in November to 60, the lowest reading since August 2016, though anything above 50 is still considered positive. The index stood at 69 in November of last year and hit a cyclical high of 74 last December.
Of the index's three components, current sales conditions fell seven points to 67, sales expectations in the next six months dropped 10 points to 65, and buyer traffic registered an eight-point drop to 45. Buyer traffic had broken out of negative territory earlier this year but now appears to be back in it solidly.
Some of the nation's largest publicly traded home builders, like Lennar (NYSE: LEN) and KB Home (NYSE:KBH), lowered their expectations for sales in 2019 in recent earnings releases. There is still a shortage of homes for sale, but newly built homes come at a price premium, and as interest rates rise, new home buyers are consequently hit hardest.
