Economic troubles are catching up with home builders, including rising inflation and higher mortgage rates.
As a result, the traffic of prospective home buyers is slowing dramatically and builder sentiment continues to wilt. The National Association of Home Builders (NAHB) describes the current environment as “a troubling sign for the housing market.”
Released this morning, the latest NAHB/Wells Fargo Housing Market Index (HMI) reveals that builder confidence in the market for newly-built single-family homes fell two points in June to a reading of 67.
The reading marks the sixth straight monthly decline and the lowest HMI reading since June 2020.
“Six consecutive monthly declines for the HMI is a clear sign of a slowing housing market in a high inflation, slow growth economic environment,” said NAHB Chairman Jerry Konter, a builder and developer from Savannah, Ga. “The entry-level market has been particularly affected by declines for housing affordability and builders are adopting a more cautious stance as demand softens with higher mortgage rates.”
Konter also said, “Government officials need to enact policies that will support the supply-side of the housing market as costs continue to climb.”
The HMI 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 are used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.