The NAHB/Wells Fargo HMI fell in July — the 15th straight month below the 40 threshold
Homebuilder confidence in the market for newly built single-family homes fell two points to 34 in July, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
The reading marks the 15th consecutive month sentiment has remained below 40 — the longest such streak since 2012 — as elevated mortgage rates, rising material costs, and broad economic uncertainty continue to push prospective buyers to the sidelines.
The July decline follows a month in which builder pessimism had already matched the longest post-crisis run on record. All three of the index's component sub-indices moved lower in July.
The gauge measuring current sales conditions slipped one point to 37, the index tracking future sales expectations fell two points to 43, and the measure of prospective buyer traffic dropped two points to 23, a reading that suggests demand is not recovering at the ground level.
"Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook," said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio.
Discounts and incentives deepen
Builders continued to lean heavily on price cuts and sales concessions to sustain demand. According to the July HMI survey, 37% of builders reduced prices, up from 35% in June and 32% in May, while the average price reduction held steady at 6%.
The share deploying sales incentives, including mortgage rate buydowns and closing cost assistance, ticked up to 63% from 62% the prior month, marking the 16th consecutive month the figure has reached 60% or higher.
The broader sales picture is equally subdued. New home sales fell for the second straight month in May to a seasonally adjusted annual rate of 580,000, down 7.3% from April and 6.8% below the year-ago pace, according to US Census Bureau data.
June figures are due next week and will offer a critical read on how the tail end of the spring selling season performed.
For mortgage brokers managing client expectations, a recent FICO survey found three in four prospective buyers are currently sitting out the US housing market, a figure that tracks closely with the HMI's buyer traffic component sitting near multi-year lows.
A new law, an old challenge
NAHB Chief Economist Robert Dietz acknowledged the passage of the 21st Century ROAD to Housing Act, a federal housing reform package enacted last week, as a constructive development, but tempered expectations.
"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," Dietz said.
"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."
Owens struck a similar note, adding that the law includes meaningful provisions on land-use, zoning, and financing tools, but that implementation will take time.
Regionally, three-month moving averages showed the Northeast and Midwest both at 45 — the firmest readings nationwide — while the South fell one point to 33 and the West slipped one point to 26.
Until rate relief materializes or the materials and labor supply equation shifts, builder sentiment has little structural basis to recover toward the neutral threshold of 50.
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