Index falls for the seventh consecutive month
In a sign of a weakening housing market, sentiment among US home builders deteriorated in July as stalled construction soured moods.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Monday came in at 55 in July, down 12 points from June. This marks the lowest HMI reading in two years and the largest single-month drop in the history of the HMI, except for the 42-point drop in April 2020. The July reading also represents the seventh straight monthly decline in builder confidence in the market for newly-built single-family homes.
“Production bottlenecks, rising home-building costs, and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” said NAHB chairman Jerry Konter. “In another sign of a softening market, 13% of builders in the HMI survey reported reducing home prices in the past month to bolster sales and/or limit cancellations.”
Looking at the monthly averages for all three HMI components, current sales conditions fell 12 points to 64, sales expectations in the next six months were down 11 points to 50, and traffic of prospective buyers dropped 11 points to 37.
“Affordability is the greatest challenge facing the housing market,” said NAHB chief economist Robert Dietz. “Significant segments of the home buying population are priced out of the market. Policymakers must address supply-side issues to help builders produce more affordable housing.”
On the other hand, remodelers remained positive despite market challenges such as higher costs and delays, as well as rising interest rates. The remodeling market sentiment, however, was down eight points to 83 in the second quarter.