Higher mortgage rates impacting home buyers

higher mortgage interestWashington, DC — Rising inflation and higher mortgage rates are slowing the movement of potential homebuyers and dampening construction sentiment, according to the National Association of Home Builders (NAHB.) One troubling sign for the housing market is builders’ confidence in the NAHB/Wells Fargo Housing Market Index (HMI) released today, the new-build single-family home market recorded a two-point decline to 67 in June for the sixth consecutive year, marking the lowest HMI reading since June. 2020.

“Six consecutive monthly declines for the HMI are a clear sign of a slowing housing market in a high-inflation, slow-growth economic environment,” said Jerry Konter, president of NAHB and a Savannah, Georgia builder/developer. The market has been particularly affected by the decline in home affordability and builders are taking a more cautious stance as demand wanes with higher mortgage rates. Government officials must adopt policies that support the supply side of the housing market as costs continue to rise.”

According to Robert Dietz, chief economist, NAHB, the housing market said both on the demand side and on the supply side. “The cost of residential building materials is up 19% year-over-year, with costs increasing for a variety of building inputs, except for wood, which has fallen recently due to a housing slowdown,” Dietz said. “On the demand side of the market, the rise in mortgage rates for the first half of 2022 has priced out a significant number of potential home buyers, as evidenced by the decline in the HMI’s traffic measure.”

Derived from a monthly survey that NAHB said it has been conducting 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 ‘poor’. 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.

According to the NAHB, all three HMI indices declined in June. The component that maps the traffic of potential buyers fell five points to 48, marking the first time this meter has fallen below the break-even level of 50 since June 2020. The HMI index measuring current sales conditions fell by one point to 77 and the meter measuring sales expectations over the next six months fell two points to 61.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 71, the Midwest fell six points to 56, the South fell two points to 78 and the West recorded a nine point drop to 74, according to the NAHB. .

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