ýbuilder Confidence Hits 2022 Low in August
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U.S. homebuilder confidence fell this month to match the lowest level since 2022, forcing firms to lean more heavily on incentives to counter high mortgage rates and persuade unmotivated buyers.
An index of housing market conditions from the National Association of ý Builders and Wells Fargo slipped 1 point to 32 in August. Economists surveyed by Bloomberg expected a slight gain in the gauge, based on the median projection.
The report showed contractors are having to increase their already liberal use of sweeteners. The share of builders using sales incentives climbed to a post-pandemic high of 66% this month, while an elevated 37% reported cutting prices. Mortgage rates have fallen slightly in recent weeks, hitting a four-month low of 6.67% in the first week of August, but remain twice as high than at the end of 2021.
“Given a slowing housing market and other recent economic data, the Fed’s monetary policy committee should return to lowering the federal funds rate, which will reduce financing costs for housing construction and indirectly help mortgage interest rates,” NAHB Chief Economist Robert Dietz said in a statement.
Among the index’s components, a measure of current sales fell 1 point to 35, while a gauge of sales expectations was unchanged. An index of prospective buyer traffic rose 2 points to a three-month high of 22.
(Bloomberg)
Without a further decline in mortgage rates, sales may have trouble gaining traction. Builders also face growing competition from the resale market, where inventory is now higher than it was before the pandemic in many markets in the South, Southwest and West, Bloomberg Intelligence analyst Drew Reading said in an Aug. 13 note.
Builders are also frustrated by “supply-side headwinds,” including government impediments that are delaying land development and building, NAHB Chairman Buddy Hughes, a North Carolina builder, said in a statement.
The drop in builder sentiment was concentrated in the Northeast, where the gauge slid to lowest level since January 2023. Confidence was unchanged in the South and Midwest, while it edged up in the West.
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