WASHINGTON — At the same time consumers are eagerly watching mortgage rates, those same elevated rates, weak buyer traffic and persistent supply-side challenges continued to weigh on home builders’ confidence in August, keeping sentiment stuck at a low level, according to a new industry survey.
Builder confidence in the market for newly built single-family homes slipped to 32 in August, down one point from July, the National Association of Home Builders/Wells Fargo Housing Market Index reported Monday. Sentiment has now remained in negative territory for 16 straight months, hovering between 32 and 34 since May.
“Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C., said in a statement. “Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.”
A Call for Lower Rates
NAHB Chief Economist Robert Dietz said in a statement that housing affordability remains central to the broader outlook for growth and inflation.
“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,” Dietz said in his statement.
The August survey also showed signs of a weak housing market. About 37% of builders reported cutting prices in August, down slightly from 38% in July. That share has held steady at 37% or 38% for three months. The average price reduction remained 5%, unchanged since last November, according to the NAHB.
It further found the use of sales incentives climbed to 66% in August, up from 62% in July and the highest share in the post-pandemic period.
About the Survey
The HMI, based on a monthly NAHB survey conducted for more than four decades, gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” It also asks builders to rate prospective buyer traffic as “high to very high,” “average” or “low to very low.” Scores are compiled into a seasonally adjusted index where any number above 50 indicates more builders view conditions as good than poor.
In August:
- The index measuring current sales conditions fell one point to 35.
- The component tracking sales expectations for the next six months held steady at 43.
- The gauge charting buyer traffic rose two points to 22 but remained at a very low level.
Confidence by Region
Regional data showed mixed results. On a three-month moving average, the Northeast slipped one point to 44, the Midwest edged up one point to 42, the South dropped one point to 29 and the West declined one point to 24.
