During the peak of the US homebuilding season, builders are not optimistic. In fact, in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index, builder confidence in the newly built single-family home market recorded its seventh consecutive monthly decline, dropping 12 points to 55.
It is one of the largest single-month declines in the HMI’s 35-year history, and the lowest HMI reading since May 2020. The HMI fell 42 points in April 2020. High inflation and rising interest rates are slowing down sales and buyers. dramatic, bringing the housing market to a standstill.
NAHB/Wells Fargo Housing Market Index – July 2022
NAHB chairman Jerry Konter cited the same issues that have been challenging the hardware store for months. “Production bottlenecks, rising home construction costs and high inflation are causing many builders to stop construction because the costs of land, construction and financing exceed the market value of the home,” Konter said. “Another sign of a weakening market, 13% of builders in the HMI survey reported cutting home prices in the past month to boost sales and/or limit cancellations.”
Higher prices price many out of the market
“Affordability is the biggest challenge facing the housing market,” said NAHB chief economist Robert Dietz. “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 housing.”
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.
HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at Housing Economics PLUS (formerly housingeconomics.com).
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This post Builders and potential homebuyers are losing confidence in the market, according to National Association of Home Builders report was original published at “https://smallbiztrends.com/2022/07/nahb-wells-fargo-housing-market-index-july-2022.html”