Builder confidence in the market for newly built single-family homes dropped by one point to 42 in July, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This marked the HMI’s lowest reading since December 2023.
The HMI index charting current sales conditions in July fell one point to 47 and the gauge charting traffic of prospective buyers also declined by a single point to 27. The component measuring sales expectations in the next six months increased one point to 48.
The July HMI survey found 31% of builders cut home prices to bolster sales in July, above the June rate of 29%. However, the average price reduction in July held steady at 6% for the 13th straight month while the use of sales incentives held steady at 61% in July, the same reading as June.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 56, the Midwest dropped four points to 43, the South decreased two points to 44 and the West posted a four-point decline to 37.
“Though inflation is still above the Federal Reserve’s target of 2%, it appears to be back on a cooling trend,” said NAHB Chief Economist Robert Dietz. “NAHB is forecasting Fed rate reductions to begin at the end of this year, and this action will lower interest rates for homebuyers, builders and developers. And while home inventory is increasing, total market inventory remains lean at a 4.4 months’ supply, indicating a long-run need for more home construction.”
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