Builder confidence plunges amid affordability woes

Washington, DC — Construction workers’ confidence plummeted in July when high inflation and rising interest rates brought the housing market to a standstill by drastically slowing sales and buyers, according to the National Association of Home Builders (NAHB). Another sign of a weakening housing market is that builders’ confidence in the newly built single-family home market fell for the seventh consecutive time in July, dropping 12 points to 55, according to the NAHB/Wells Fargo Housing Market Index (HMI). This marks the lowest HMI reading since May 2020 and the largest single-month drop in HMI history, excluding the 42-point drop in April 2020.

“Production bottlenecks, rising home construction costs, and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” said Jerry Konter, president of NAHB, and a home builder and developer from Savannah, Georgia. . “Another sign of a weakening market, 13% of builders in the HMI survey reported lowering home prices in the past month to boost sales and/or limit cancellations.”

NAHB chief economist, Robert Dietz, added: “Affordability is the biggest challenge facing the housing market. Significant segments of home buyers are being priced out of the market. Policymakers need to address supply-side issues to help builders produce more affordable homes.”

Derived from a monthly survey conducted by NAHB for more than 35 years, the NAHB/Wells Fargo HMI polls builders’ perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or ” arm.” The survey also asks builders to rate potential buyer traffic as “high to very high,” “medium,” or “low to very low.” The scores for each component are then used to calculate a seasonally adjusted index, with any number above 50 indicating that more builders view the conditions as good than bad.

All three HMI components declined in July: current sales conditions fell 12 points to 64, sales expectations in the next six months fell 11 points to 50 and potential buyer traffic fell 11 points to 37.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 65, the Midwest fell four points to 52, the South eight points to 70, and the West recorded a 12-point drop to 62.

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