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Mortgage rates that continue to hover in the 7 % range along with elevated construction financing costs continue to put a damper on builder sentiment . Builder confidence in the market for newly built singlefamily homes was 43 in June , down two points from May , according to the National Association of Home Builders ( NAHB )/ Wells Fargo Housing Market Index ( HMI ) released today . This is the lowest reading since December 2023 .
“ Persistently high mortgage rates are keeping many prospective buyers on the sidelines ,” said NAHB Chairman Carl Harris , a custom home builder from Wichita , Kan . “ Home builders are also dealing with higher rates for construction and development loans , chronic labor shortages and a dearth of buildable lots .” “ We are in an unusual situation because a lack of progress on reducing shelter inflation , which is currently running at a 5.4 % year-over-year rate , is making it difficult for the Federal Reserve to achieve its target inflation rate of 2 %,” said NAHB Chief Economist Robert Dietz . “ The best way to bring down shelter inflation and push the overall inflation rate down to the 2 % range is to increase the nation ’ s housing supply . A more favorable interest rate environment for construction and development loans would help to achieve this aim .” The June HMI survey also revealed that 29 % of builders cut home prices to bolster sales in June , the highest share since January 2024 ( 31 %) and well above the May rate of 25 %. However , the average price reduction in June held steady at 6 % for the 12th straight month . Meanwhile , the use of sales incentives ticked up to 61 % in June from a reading of 59 % in May . This metric is at its highest share since January 2024 ( 62 %). 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 single-family home sales and sales expectations for the next six months as “ good ,” “ fair ” or “ poor .” The survey also asks builders to rate traffic of
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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 component indices posted declines in June and all are below the key threshold of 50 for the first time since December 2023 . The HMI index charting current sales conditions in June fell three points to 48 , the component measuring sales expectations in the next six months fell four points to 47 and the gauge charting traffic of prospective buyers declined two points to 28 . |
Looking at the three-month moving averages for regional HMI scores , the Northeast held steady at 62 , the Midwest dropped three points to 47 , the South decreased three points to 46 and the West posted a twopoint decline to 41 . |
HMI tables can be found at nahb . org / hmi . More information on housing statistics is also available at Housing Economics PLUS . |