Homebuilder confidence slipped in August as the housing market grapples with affordability headwinds and buyer skittishness amid high interest rates and home prices, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Thursday.
The index, which measures builder sentiment, dipped two points to 39 in August from a downwardly revised reading of 41 the month prior, the NAHB reported. That’s the lowest level since December 2023.
“Challenging housing affordability conditions remain the top concern for prospective homebuyers in the current reading of the HMI, as both present sales and traffic readings showed weakness,” NAHB Chairman Carl Harris, a custom home builder based in Wichita, Kansas, said in a statement. “The only sustainable way to effectively tame high housing costs is to implement policies that allow builders to construct more attainable, affordable housing.”
About three-quarters of the builder responses to the HMI came during the first week of the month when interest rates were higher at 6.73%, according to Freddie Mac data. However, mortgage rates slid to 6.47% the following week, hitting their lowest point since May 2023.
The NAHB/Wells Fargo HMI is derived from a monthly survey of home builders who rate three specific factors based on what they see in their business, including: current single-family home sales, expected single-family homes sales in the next six months and foot traffic from potential homebuyers of newly built homes.
It’s widely expected the Federal Reserve will cut its benchmark interest rate in September. That, coupled with downward movement in mortgage rates, could help spur buyer activity and boost builder sentiment in the coming months, noted NAHB Chief Economist Robert Dietz.
In August, 33% of builders said they cut new home prices to boost sales, the HMI survey found. The month prior, 31% of builders cut prices while the average home-price cut in August stayed at 6% for the 14th consecutive month.
Additionally, 64% of builders said they used sales incentives in August, up from 61% in July. It marks the highest level builders have used incentives since April 2019, underscoring their eagerness to move inventory.
