Economists expected the National Association of Homebuilders (NAHB) index to remain steady in September. Instead, the index took a 10 percent dive, from 50 to 45.

HMI data courtesy of the NAHB, chart by Mish

The NAHB/Wells Fargo Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market.

The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

NAHB Wells Fargo Housing Market Index Since 1985

HMI data courtesy of the NAHB, chart by Mish

Buyer traffic is in a deep recession. It will remain so as long as interest rates stay high.

Conditions rebounded from even deeper levels earlier this year when mortgage rates briefly fell. Also, homebuilders resorted to mortgage rate buydowns, were able to pass on falling lumber prices, and they built smaller homes.

Further options to entice buyers have run out of steam.

NAHB Wells Fargo Housing Market Index Present Minus Expected Conditions

HMI data courtesy of the NAHB, calculation and chart by Mish

Why would anyone think conditions will improve? Is the Fed going to cut rates?

How Much More Will Homebuilders Have to Reduce Prices to Increase Sales?

Median new home sales prices vs new home sales, data from the Census Department, chart by Mish

New Home Sales vs Median Sales Price Detail

Buyers hit a brick wall on price with a peak of $496,800 in October of 2022. Median price has fallen 16.4 percent since then (as of June, above chart).

As of August, the median price is $436,700, down 12.1 percent. from the all time high. But what are you getting for your money now?

For discussion, please see How Much More Will Homebuilders Have to Reduce Prices to Increase Sales?

A quick check on Mortgage News Daily show the average 30-year rate is 7.31 percent. So, expect sales to remain in a slump, with existing home sales faring worse.

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