The monthly Housing Market Index (HMI), released by the National Association of Home Builders (NAHB)/Wells Fargo this week, came in at 32 this past August. The index measures builder sentiment on current and future single-family home sales along with buyer traffic on a scale ranging between 0 and 100. The HMI has been consistently dropping every month this year, now down 15 points since January’s high of 47.
While the HMI saw some bigger drops earlier in the year, it has remained at or below 34 since May, briefly increasing by just one point in July before falling back down again in August, according to NAHB.
Regionally, the Midwest, South and West all stayed pretty consistent on a month-to-month basis, coming in at 43, 29 and 26 points, respectively. The Northeast, however, dropped significantly from 48 points in July to 39 in August.
“Affordability continues to be the top challenge for the housing market, and buyers are waiting for mortgage rates to drop to move forward,” said NAHB Chairman Buddy Hughes. “Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.”
Looking at data obtained from a monthly survey conducted by NAHB where builders rate multiple conditions that factor into the overall HMI, any score over 50 indicates a majority of builders viewing conditions as good. Sales conditions fell one point to 35, sales expectations in the next six months held steady at 43 while traffic of prospective buyers increased by two points to 22.
Further signaling a soft housing market, the NAHB survey revealed results that also show little momentum. Thirty-seven percent of builders reported cutting prices in August, down from 38% in July, remaining pretty consistent for the past few months. The average price reduction was 5% in August, reportedly the same that it’s been every month since last November. Additionally, the use of sales incentives was 66% in August, up from 62% in July and the highest percentage in the post-Covid period.
With builder confidence stuck at low levels, industry professionals say all eyes are on the Federal Reserve’s next move.
“Given a slowing housing market and other recent economic data, the Fed’s monetary policy committee should return to lowering the federal funds rate, which will reduce financing costs for housing construction and indirectly help mortgage interest rates,” said NAHB Chief Economist Robert Dietz.
For the full report, click here.
