Data download courtesy of Wells Fargo and the NAHB, chart by Mish

The HAHB Hosing Market Index for November 2023 is one of the worst on record. Only the Great Recession housing bubble as shown in the chart below was substantially worse.

Understanding the Index

The NAHB/Wells Fargo HMI is a weighted average of three separate component indices: Present Single-Family Sales, Single-Family Sales for the Next Six Months, and Traffic of Prospective Buyers. Each month, a panel of builders rates the first two on a scale of “good,” “fair” or “poor” and the last on a scale of “high to very high,” “average” or “low to very low”. An index is calculated for each series by applying the formula “(good – poor + 100)/2” or, for Traffic, “(high/very high – low/very low + 100)/2”.

Each resulting index is first seasonally adjusted, then weighted to produce the HMI. The weights are .5920 for Present Sales, .1358 for Sales for the Next Six Months, and .2722 for Traffic. The weights were chosen to maximize the correlation with starts through the following six months. The HMI can range between 0 and 100.

NAHB Wells Fargo Housing Market Index Since 1985

Mortgage rates are down from the recent highs over 8.0 percent to 7.36 percent as reported by Mortgage News Daily.

However, no one wants to trade a 3.0-percent mortgage for one over 7.0 percent. Also existing home prices are back to record highs, so affordability is in the gutter.

Existing Home Sales vs New Home Sales

On October 19, I noted Existing Home Sales Drop Another Two Percent to a 13-Year Low

In sharp contrast, on October 25, I noted New Home Sales Jump 12.3 Percent Smash Expectations

New home sales are much better than existing home sales because builders are offering mortgage rate buydowns, build smaller homes, and are cutting back on lot and room sizes.

Add it all up and you are not getting a bargain buying anything today. Blame the Fed for these conditions.

How the Fed Destroyed the Housing Market and Created Inflation in Pictures

For discussion of the Fed’s role in this mess, please see How the Fed Destroyed the Housing Market and Created Inflation in Pictures

The Fed is largely responsible for the Great Recession crash, but this one is totally on them.

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