WASHINGTON — Builder confidence in the market for newly built single-family homes declined in June as elevated mortgage rates, rising construction costs and affordability challenges continued to weigh on housing demand, according to the National Association of Home Builders.
The NAHB/Wells Fargo Housing Market Index fell two points to 35 in June, marking the 14th consecutive month that builder sentiment has remained below 40, according to data released Tuesday by the association.
The prolonged stretch of weak confidence is the longest since 2011 and 2012, during the aftermath of the foreclosure crisis.
“With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building,” said Bill Owens, chairman of the National Association of Home Builders and a builder and remodeler from Ohio.
Passage of Legislation Urged
Owens urged Congress to approve housing-related legislation, including a major housing package currently before the Senate, as well as measures designed to address construction labor shortages and prevent state and local restrictions on natural gas use in new homes.
NAHB Chief Economist Robert Dietz said regulatory costs remain a significant obstacle to increasing housing supply.
“Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply,” Dietz said.
According to a new NAHB study cited by Dietz, government regulations, taxes, fees and other compliance costs add more than 26% to the price of a typical single-family home. He said reducing permitting delays, easing density restrictions and reforming zoning requirements could help lower costs and increase housing production.
Reliance on Incentives
The survey also found builders are increasingly relying on incentives to attract buyers.
Thirty-five percent of builders reported cutting home prices in June, up from 32% in May. The average price reduction remained unchanged at 6%.
Meanwhile, 62% of builders reported using sales incentives during the month, up slightly from 61% in May. June marked the 15th consecutive month in which at least 60% of builders reported offering incentives to boost sales.
The Housing Market Index, based on a monthly survey conducted by NAHB for more than four decades, measures builder perceptions of current sales conditions, expected sales over the next six months and prospective buyer traffic. Readings above 50 indicate more builders view conditions as good than poor.
Additional Findings
Additional findings in the latest survey include:
- The index measuring current sales conditions fell two points to 38 in June. The component measuring expected sales over the next six months held steady at 45, while the index tracking prospective buyer traffic remained unchanged at 25.
- Regionally, the three-month moving average of builder sentiment was mixed. The Northeast rose two points to 44, while the Midwest remained unchanged at 43. The South declined two points to 33, and the West fell one point to 27.
