A contractor works on a new home under construction in Tucson, Arizona, US, on Tuesday, February 22, 2022. Sales of new US homes fell in January after a wave of purchases at the end of 2021, indicating a jump in mortgage rates may have begun in curb demand.
Rebecca Noble | Bloomberg | Getty Images
Confidence among builders in the country’s single-family housing market slumped in July to its lowest level since the start of the pandemic.
The National Association of Home Builders/Wells Fargo Housing Market Index, a survey designed to gauge market conditions, found that building sentiment fell 12 points to 55. It was the largest one-month drop in the survey’s 37-year history except for April in 2020, when The reading dropped 42 points to 30 after the start of the Covid-19 pandemic.
Any rating above 50 on the index is still considered positive, but sentiment is now down 24 points since March, when mortgage rates started to climb. The average 30-year fixed-rate mortgage has nearly doubled since January, and is now hovering just under 6%.
Sentiment stabilized at 80 in July last year after hitting a record high of 90 in November 2020, when the pandemic triggered a wave of home buying among people looking for more space in less urban areas. Now, concerns about inflation and recession are among the factors affecting building sentiment.
Among the three components of the index, building sentiment on current sales conditions fell by 12 points to 64, while sales expectations for the next six months fell by 11 points to 50, and sentiment about movement of buyers fell by 11 points to 37. This last component is now strongly negative . province.
“Affordability is the biggest challenge facing the housing market,” said Robert Dietz, NAHB’s chief economist. “Large segments of the population who buy homes are priced off the market.”
Some of the top publicly traded home builders addressed affordability in their latest earnings release, saying they would work with buyers to accommodate tighter budgets. But the price of a newly built home in May was $449,000, up 15% from last year. That may change in the coming months.
In another sign of the market pulling back, 13% of builders in an HMI survey reported cutting home prices in the past month to boost sales or reduce cancellations, according to Jerry Counter, president of NAHB and home builders in Savannah, Georgia.
“Production bottlenecks, rising home-building costs and high inflation are causing many builders to shut down because the cost of land, construction and financing exceeds the market value of the home,” Konter said.
In the Northeast, building sentiment on the three-month moving average fell 6 points to 65. In the Midwest, sentiment fell 4 points to 52, and sentiment in the South dropped 8 points to 70. The West saw the biggest drop, dropping by 12 points to 62.
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