Economic uncertainty and persistent affordability challenges driven by rising material prices, high land costs, and elevated mortgage rates continue to weigh on builder sentiment, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Builder confidence in the market for newly built single-family homes fell two points to 34 in July, down from an upwardly revised reading of 36 in June. Sentiment has remained below 40 for 15 consecutive months, the longest such stretch since 2012.
What NAHB says
“Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook,” says NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.”
“With the HMI below 40 for 15 straight months, affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market,” says NAHB Chief Economist Robert Dietz. “Looking ahead, the newly enacted housing law is a positive step that will help expand housing supply and lower overall housing costs, although more policy change is needed at the state and local level.”
The latest HMI survey also revealed that 37% of builders cut prices in July, up from 35% in June and 32% in May. The average price reduction was 6% in July, the same rate as the previous month. The use of sales incentives was 63% in July, up slightly from 62% in June, and marking the 16th consecutive month this share has reached 60% or higher.
