ISTANBUL

Homebuilding sentiment in the US declined in November due to rising interest rates, according to a report released Thursday.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell six points to 34 from 40 in October.

"The rise in interest rates since the end of August has dampened builder views of market conditions, as a large number of prospective buyers were priced out of the market," NAHB Chairman Alicia Huey said in a statement.

"Moreover, higher short-term interest rates have increased the cost of financing for home builders and land developers, adding another headwind for housing supply in a market low on resale inventory. While the Federal Reserve is fighting inflation, state and local policymakers could also help by reducing the regulatory burdens on the cost of land development and home building, thereby allowing more attainable housing supply to the market," she added.

While above 50 is considered positive for the housing sector, the index measures sentiment among homebuilders and is considered an important indicator for housing investment and consumer spending on appliances and furnishings, which affect the overall economy.

NAHB chief economist Robert Dietz said recent macroeconomic data point to improving conditions for home construction in the coming months.

"In particular, the 10-year Treasury rate moved back to the 4.5% range for the first time since late September, which will help bring mortgage rates close to or below 7.5%. Given the lack of existing home inventory, somewhat lower mortgage rates will price-in housing demand and likely set the stage for improved builder views of market conditions in December," he said.

NAHB said it is forecasting approximately a 5% increase for single-family starts in 2024 as financial conditions ease with improving inflation data in the months ahead.

Many builders continue to reduce home prices to boost sales as mortgage rates have run above 7% since mid-August, said the report, adding that 36% of builders reported cutting prices in November, up from 32% in the previous two months.