Builder sentiment remains low, influenced by economic uncertainty and affordability challenges coupled with rising material prices, high land costs, and elevated mortgage rates.
Builder confidence in the market for newly built single-family homes fell two points to 34 in July, according to the latest NAHB/Wells Fargo Housing Market Index (HMI). An index value below 50 indicates more builders view conditions as good than poor. Sentiment has remained below an index level of 40 for 15 consecutive months, the longest stretch since 2012, according to the NAHB.
“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. “The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform, and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.”
The HMI survey revealed 37% of builders cut prices in July, up two percentage points from June. The use of sales incentives remained elevated at 63% in July, marking the 16th consecutive month the share has reached 60% or higher. These results mirror recent data from Zonda, which indicate the share of incentives remains above 60% for to-be-built homes and nearly 80% on quick move-in supply.
“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,” said NAHB chief economist Robert Dietz.
The HMI is composed of three indices gauging builder perceptions of current sales conditions, sales expectations for the next six months, and traffic of prospective buyers. Each sub-indices posted declines in July.
The HMI tracking current sales conditions fell one point to 37, the index measuring future sales dropped two points to 43, and the index gauging the perception of prospective buyers posted a two-point decline to 23.
Regionally, the three-month moving HMI averages fell in the South and West and increased in the Midwest and Northeast.
