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Source: Reuters —
Dec 19 (Reuters) – Confidence among U.S. single-family home builders fell for a record 12th straight month in December as even a scramble to offer incentives for prospective buyers failed to boost traffic and lift sales in today’s high-inflation, high-interest rate environment.
Kicking off a week of key reports on the health of the foundering U.S. housing market, the National Association of Home Builders on Monday said its NAHB/Wells Fargo Housing Market Index dropped two points to 31 this month, falling short of the median estimate of 34 among economists in a Reuters poll. A reading above 50 indicates that more builders view conditions as good rather than poor.
With the exception of the short-lived plunge during the spring of 2020 when the country locked down during the first wave of COVID-19, December’s reading marked the lowest since June 2012. Moreover, the unbroken string of declines since last December is the longest in a series that dates to the mid-1980s.
The housing market has seen the most pronounced effects so far of the aggressive Federal Reserve interest rate hikes that are aimed at quashing inflation that continues to hold at unacceptably high levels. Interest rates on the most popular type of U.S. home loan topped 7% – the highest since 2001 – in October, and sales of new and existing homes tumbled by more than 30% from January through October.
Since March, the U.S. central bank has lifted its benchmark policy rate from near zero to a range of 4.25%-4.50%. It indicated at its policy meeting last week that rate hikes will continue into next year until it is fully confident that inflation is declining from the four-decade highs touched in mid-2022 back toward its targeted level of 2% at an annual rate.