Builder Confidence Hit a 14-Year Low. My FSBO Take

Builder Confidence Hit a 14-Year Low. My FSBO Take

This week the homebuilders told on themselves. The NAHB/Wells Fargo Housing Market Index dropped three points to 29 in October, and that is the lowest reading since June 2012. Fourteen years. The last time builders felt this gloomy, we were still digging out of the last housing crash. As an FSBO seller, you should read that number the way a poker player reads a tell.

Why are they spooked? The 30-year fixed mortgage rate averaged 7.40% in the week ending October 15, according to Freddie Mac, the highest in nearly three years. A year ago it was 6.27%. Buyers have gone quiet, and builders can see it in their order books. The Commerce Department reported that single-family housing starts fell 4.6% in September to an annual rate of 859,000 units, and building permits dropped 4% to 845,000, the lowest in three and a half years.

New-home sales told the same story. The Mortgage Bankers Association estimated that new single-family home sales fell 12% in September to a seasonally adjusted annual rate of 584,000, the slowest pace since April 2020. And here is the part that matters to you: slower sales are pushing builders to offer mortgage rate buydowns, closing cost assistance and free upgrades just to move their standing inventory, according to New American Funding's market recap.

What scared builders mean for your listing

First, the good news. When builders pull back on starts, the future supply of competing homes shrinks. Every permit they don't pull is a brand-new house that won't be competing with yours next spring. Less competition is the one thing money can't buy, and it's landing in your lap for free.

Second, the warning. Builders with finished spec homes sitting on the books are about to discount them. They carry land loans and construction debt, so they can't sit on inventory the way you can. Before you set your asking price, go check what the new builds in your zip code are actually listed at right now, not six months ago. Your ceiling is their floor.

Third, your weapon. NAHB CEO Jim Tobin told Fox Business this week that mortgage rates are "eating up all the good news" on housing. Buyers are paralyzed by the monthly payment, and the seller who solves that problem wins the buyer. Builders do it with buydowns. You can do the same thing, and you have an advantage they don't: you saved the listing commission. Offering a 2-1 buydown or a few thousand in closing credit out of that saving is not a cost, it's a tactic. It gets your buyer off the fence for less than one month of carrying costs.

My advice, plain and simple

Don't chase rates lower. The market clock is not going to rewind to 2021 for you. The buyers still out there are serious, and serious buyers show up precisely when everyone else gives up. Price below the builder spec homes near you, dangle a buydown to melt the 7.4% sticker shock, and list while the builders are still licking their wounds. Their fear is your head start.

If you want a refresher on pricing in a shifting market, my pricing breakdown walks through the numbers, and the mortgage guide explains how buydowns actually work at the closing table.

Sources: Benzinga/TradingView on the October builder confidence report; Commerce Department housing starts data; New American Funding on new-home sales and builder incentives.