The quote - attributed to Upton Sinclair - sums up the blind optimism that has dominated homebuilder confidence data for the last six months. But reality is really starting to sink in and this morning's data for October shows another big disappointment as the headline NAHB confidence index printed at 9-month lows (down 5 to 45, vs 49 exp). That is the 4th straight monthly miss in a row (and 5 upside surprises)...
Alicia Huey, NAHB chair, said in a statement:
Measures of current and expected sales, as well as a gauge of prospective buyer traffic, also dropped to their lowest levels since the start of the year.
Adding that "higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability," Huey said.
Builder sentiment in all four major US regions declined from a month earlier.
In order to get buyers to close deals in the current high interest-rate environment, many builders are offering financial incentives. The share of builders offering all types of buyer incentives rose to 62% this month, matching the cycle high reached in December.
And if homebuyer confidence is anything to go by, homebuilder confidence has a long way to go to catch down to the harsh reality of almost 8% mortgages (when median mortgage holders' rates are around 3-4%)...
If manipulating affordability lower was The Fed's goal, they failed.
And don't expect them to be building homes at the same pace (building permits are about to plunge)...
And the sudden realization by homebuilders that this is more than transitory - and their margins can't keep soaking up incentives forever - then the real pain is yet to come.