Builder confidence in the market for newly built single-family homes fell two points to 34 in July, down from an upwardly revised reading of 36 in June, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Any HMI level over 50 indicates that more builders view conditions as good than poor. However, sentiment has remained below 40 for 15 consecutive months, the longest pessimistic stretch since 2012.
All of the HMI sub-indices posted declines in July. The HMI index gauging current sales conditions dipped one point to 37, the index measuring future sales dropped two points to 43, and the index charting traffic of prospective buyers posted a two-point decline to 23.
Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 45, the Midwest increased two points to 45, the South fell one point to 33, and the West dropped one point to 26.
The latest HMI survey also revealed that 37% of builders cut prices in July, up from 35% in June and 32% in May. The average price reduction was 6% in July, the same rate as the previous month. The use of sales incentives was 63% in July, up slightly from 62% in June, and marking the 16th consecutive month this share has reached 60% or higher.
“Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.”
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