BuildersOutlook2022Issue7 - Page 5

2022Issue7

Builder Confidence Plunges

Builder confidence plunged in July as high inflation and increased interest rates stalled the housing market by dramatically slowing sales and buyer traffic . In a further sign of a weakening housing market , builder confidence in the market for newly built single-family homes posted its seventh straight monthly decline in July , falling 12 points to 55 , according to the National Association of Home Builders ( NAHB )/ Wells Fargo Housing Market Index ( HMI ) released today . This marks the lowest HMI reading since May 2020 and the largest single-month drop in the history of the HMI , except for the 42-point drop in April 2020 .
“ Production bottlenecks , rising home building costs and high inflation are causing many builders to halt construction because the cost of land , construction and financing exceeds the market value of the home ,” said NAHB Chairman Jerry Konter , a home builder and developer from Savannah , Ga . “ In another sign of a softening market , 13 % of builders in the HMI survey reported reducing home prices in the past month to bolster sales and / or limit cancellations .”
“ Affordability is the greatest challenge facing the housing market ,” said NAHB Chief Economist Robert Dietz . “ Significant segments of the home buying population are priced out of the market . Policymakers must address supply-side issues to help builders produce more affordable housing .” Derived from a monthly survey that NAHB has been conducting for more than 35 years , the NAHB / Wells Fargo HMI gauges builder perceptions of current singlefamily home sales and sales expectations for the next six months as “ good ,” “ fair ” or “ poor .” The survey also asks builders to rate traffic of prospective buyers as “ high to very high ,” “ average ” or “ low to very low .” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor .
All three HMI components posted declines in July : Current sales conditions dropped 12 points to 64 , sales expectations in the next six months declined 11 points to 50 and traffic of prospective buyers fell 11 points to 37 .
Looking at the three-month moving averages for regional HMI scores , the Northeast fell six points to 65 , the Midwest dropped four points to 52 , the South fell eight points to 70 and the West posted a 12-point decline to 62 .
HMI tables can be found at nahb . org / hmi . More information on housing statistics is also available at Housing Economics PLUS ( formerly housingeconomics . com ).
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