Builder confidence stayed subdued as ongoing affordability challenges, rising material costs, and elevated mortgage rates continue to put pressure on the housing market.
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built single-family homes fell two points to 35 in June. This is the 14th straight month that sentiment has remained below 40, a streak not seen since 2011 to 2012 during the foreclosure crisis, NAHB points out.
“With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building,” says NAHB chairman Bill Owens. “Congress can help by passing the major housing package now before the Senate, along with the CONSTRUCTS Act to address the construction labor shortage and the Energy Choice Act to prevent state and local bans on natural gas in new homes.”
The latest HMI survey shows that 35% of builders cut prices in June, up from 32% in May. The average price reduction was 6% in June, the same rate as May. Up slightly from 61% in May, the use of sales incentives was 62% in June, which is the 15th consecutive month this share has reached 60% or higher.
“Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply,” adds NAHB chief economist Robert Dietz. “According to a new NAHB study, government regulation, taxes, fees, and other costs add more than 26% to the price of an average single-family home. Easing permitting bottlenecks, density limits, and inefficient zoning rules would help reduce costs and support the housing growth the nation needs.”
The survey measures builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” Builders also rate prospective buyer traffic as “high to very high,” “average,” or “low to very low.” Scores from each component are used to calculate a seasonally adjusted index, where a reading above 50 indicates more builders view conditions as good than poor.
The HMI index gauging current sales conditions fell two points to 38 in June, the index measuring future sales stayed at 45, while the index charting traffic of prospective buyers remained unchanged at 25.
Regionally, the three-month moving averages were mixed. The Northeast rose two points to 44, the Midwest sat at 43, the South fell two points to 33, and the West decreased one point to 27.
