Builder confidence in the market for newly built single-family homes reached its lowest reading since December 2023, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
For June, the HMI dropped two points from May to a 43 reading. 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 dropped 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 dipped 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 two-point decline to 41.
“Persistently high mortgage rates are keeping many prospective buyers on the sidelines,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas. “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.”
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