Elevated mortgage rates, weak buyer traffic, and ongoing supply-side issues continued to weigh on builder confidence in August. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), released today, builder sentiment for newly built single-family homes was measured at 32, down one point from July. This marks the 16th consecutive month that builder sentiment has remained in negative territory, with readings staying between 32 and 34 since May.
“Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.”
“Housing affordability is central to the outlook for economic growth and inflation,” said NAHB Chief Economist Robert Dietz. “Given a slowing housing market and other recent economic data, the Fed’s monetary policy committee should return to lowering the federal funds rate, which will reduce financing costs for housing construction and indirectly help mortgage interest rates.”
The latest HMI survey indicated that 37% of builders reported cutting prices in August, a slight decrease from 38% in July. This percentage has stayed consistent over the past three months. The average price reduction remained at 5%, unchanged since last November. Use of sales incentives rose to 66% in August from 62% in July, marking the highest level seen since the post-Covid period.
The NAHB/Wells Fargo HMI is based on a monthly survey conducted by NAHB for more than four decades. It measures builder perceptions of current single-family home sales and expectations for sales over the next six months as either “good,” “fair,” or “poor.” Builders also assess prospective buyer traffic as “high to very high,” “average,” or “low to very low.” These responses are used to calculate a seasonally adjusted index; scores above 50 indicate more builders view conditions as good rather than poor.
In August, the component measuring current sales conditions fell by one point to 35. Sales expectations for the next six months held steady at 43. The measure tracking prospective buyer traffic increased by two points to reach 22 but remains low.
Regional HMI scores based on three-month moving averages showed mixed results: The Northeast declined by one point to 44; the Midwest increased by one point to 42; the South dropped by one point to 29; and the West decreased by one point to 24.
More detailed HMI tables can be accessed at https://www.nahb.org/hmi. Additional housing statistics are available through Housing Economics PLUS.
