Many people have been saying how great lower interest rates are for the housing industry. Reality, however, says something different. Home sales and new home construction have not benefitted from lower interest rates…only refinancing has.

According to Peter Boocknar, the chief investment officer at Bleakley Advisory Group and CNBC contributor, “The further drop in mortgage rates (now well below 4% at 3.77%) (has done) nothing to encourage people to buy, as there (has been) no change in intentions to buy a home…instead, there (has been) a 9 percentage point jump in those saying ‘now is a good time to sell a home’…the most since 1992.”

Jeff Mezger, the CEO of California-based KB Home, agrees. “I’ve always maintained over the years that consumer confidence means more than rates to the home buying decision. We’ve had some great years when interest rates were 8, 9, 10%…because people find a way when they feel confident about the future.”

According to the University of Michigan, consumer confidence has fallen sharply in 2019. Consumers indicate they need to be cautious about spending money in anticipation of a potential recession and this cautiousness is bleeding into the housing market.

Similarly, lower interest rates have done nothing to encourage homebuilders to build more houses. In fact, during the first seven months of this year, housing starts have been lower than last year. KB Home’s Mezger said, “Frankly, as an industry, (fallen consumer confidence) is what’s holding us back from getting to normalized levels. We’re only going to invest and build if we can get a return…and we can’t get a return if buyers aren’t willing to step up.”

Mathew Speakman, an economist with Zillow, said, “This (recent) flare-up with both markets (Wall Street’s 800-point drop and the bond market’s inverted yield curve) flashing recession warnings does not promote fertile ground for new housing investment. Consumers are standing ready to snap up new homes, particularly at the entry level, and mortgage rates are cooperating – but new construction is not.”

Thanks to CNBC’s Diana Ollick for source data.

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