Builder sentiment slides again in April
Builder sentiment declined in April for a fourth straight month as elevated construction costs and no end to rising home prices continue to impact housing affordability.
Builder confidence in the market for newly built single-family homes moved two points lower to 77 in April, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.
“Despite low existing inventory, builders report sales traffic and current sales conditions have declined to their lowest points since last summer as a sharp jump in mortgage rates and persistent supply chain disruptions continue to unsettle the housing market,” said NAHB Chairman Jerry Konter, a builder and developer from Savannah, Ga. “Policymakers must take proactive steps to fix supply chain issues that will reduce the cost of development, stem the rise in home prices and allow builders to increase pro.duction.”
Mortgage interest rates have jumped more than 1.9 percentage points since the start of the year and currently stand at 5%, the highest level in more than a decade. At the same time, the cost of materials used in residential construction also continues to climb.
“The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” said NAHB Chief Economist Robert Dietz.
The NAHB released launched a signature campaign aimed at telling the White House that action is quickly needed to prevent the housing market from derailing.
The HMI index gauging current sales conditions fell two points to 85 and the component charting traffic of prospective buyers posted a six-point decline to 60. The gauge measuring sales expectations in the next six months increased three points to 73 following a 10-point drop in March.
Looking at the three-month moving averages for regional HMI scores, the Northeast posted a one-point gain to 72 while the Midwest dropped three points to 69, the South fell two points to 82 and the West edged one-point lower to 89.
The HMI is derived from a monthly survey that gauges builder 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 traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
More information and the HMI tables can be found at nahb.org/hmi.
