Home builders continued to express minimal optimism in the market for newly built single-family homes, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which registered a 32 level in August, down one point from July.
Any index reading over 50 indicates that more builders view conditions as good than poor. The NAHB noted builder sentiment has now been in negative territory for 16 consecutive months and has hovered at a relatively low reading between 32 and 34 since May.
“Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina. “Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.”
The HMI index gauging current sales conditions fell one point in August to a level of 35 while the component measuring sales expectations in the next six months held steady at 43. The gauge charting traffic of prospective buyers posted a two-point gain to 22 but remains at a very low level.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 44, the Midwest gained one point to 42, the South dropped one point to 29 and the West declined one point to 24.
Furthermore, the latest HMI survey also revealed that 37% of builders reported cutting prices in August, down from 38% in July. The average price reduction was 5% in August, unchanged since last November. The use of sales incentives was 66% in August, up from 62% in July and the highest percentage in the post-Covid period.
“Housing affordability is central to the outlook for economic growth and inflation,” said NAHB Chief Economist Robert Dietz. “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.”
