Builder confidence fell in August as mortgage rates inched back up toward 7%, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the seventh straight month of increases and marks the highest level since June 2022.
“Rising mortgage rates and high construction costs stemming from a dearth of construction workers, a lack of buildable lots and ongoing shortages of distribution transformers put a chill on builder sentiment in August,” said NAHB Chairman Alicia Huey. “But while this latest confidence reading is a reminder that housing affordability is an ongoing challenge, demand for new construction continues to be supported by a lack of resale inventory, as many homeowners elect to stay put because they are locked in at a low mortgage rate.”
The HMI dropped six points in August to 50 (any number over 50 indicates that more builders view conditions as good than poor), and all three major HMI indices saw decreases as well.
The data:
- The HMI index gauging current sales conditions fell five points to 57.
- The component charting sales expectations in the next six months fell four points to 55.
- The gauge measuring traffic of prospective buyers dropped four points to 34.
- Regionally, the Northeast increased four points to 56. The Midwest and South were both unchanged at 45 and 58, respectively, and the West edged down one point to 50.
- Sales incentives saw a rise again due to market conditions. While the share of builders cutting prices to bolster sales rose again to 25%, the average decline for builders reducing prices remained at 6%. The share of builders using incentives to bolster sales was 55% (higher than July’s 52% but still lower than 62% in December 2022).
“Declining customer traffic is a reminder of the larger challenge that shelter inflation is up 7.7% from a year ago and accounted for a striking 90% of the July Consumer Price Index reading of 3.2%,” said NAHB Chief Economist Robert Dietz. “The best way to bring housing inflation down and ease the housing affordability crisis is to enact policies at all levels of government that will allow builders to construct more homes to address a nationwide shortfall of approximately 1.5 million housing units.”
In a similar vein, RISMedia’s Broker Confidence Index (BCI) also saw a decrease, from 6.7 in June to 6.5 in July. This reading comes in identically to the reading in January. RISMedia Senior Editor Jesse Williams, author of the BCI, attributes this to mortgage rates reaching back up to January numbers and a general unsettled nature across the market.
For the full report, including data tables, click here.
