Home Builder Confidence Continues to Fall

Builders might expect demand stability in upcoming months, says NAHB economist

“Ongoing growth in construction costs and high mortgage rates continue to weaken market sentiment for single-family home builders,” noted Jerry Konter, a Savannah, Georgia home builder and Chairman for the National Association of Home Builders (NAHB).

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reveals that consumer hesitation on home building continues as buyer traffic in August dipped to its lowest level since April 2014—excepting the pandemic decline in spring 2020.

NAHB Chief Economist Robert Dietz believes a housing recession is in effect, but there may be positive news ahead. 

“The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011,” says Dietz.  “However, as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in coming months.”

Other interesting survey findings:

·        19% of surveyed builders dropped prices in the previous month to grow sales or slow cancellations with a median price reduction of 5%;

·        69% of builders say higher rates are the main reason consumers choose not to build; and

·        Confidence level for builders for newly constructed homes fell to 49, below the break-even metric of 50.

Post authored by Lora Bray.

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