Political | Process

Any rating above 50 on the index is still considered positive, but sentiment has now fallen 24 points since March. That marked the largest single-month drop in the survey’s 37-year history. The average rate on the 30-year fixed mortgage has nearly doubled since January and is now hovering just below 6%.

Of the index’s three components, builder sentiment about current sales conditions dropped 12 points to 64. Sales expectations for the next six months fell 11 points to 50 and sentiment about buyer traffic declined 11 points. “Affordability is the greatest challenge facing the housing market,” says NAHB’s chief economist.

13% of builders in the HMI survey reported reducing home prices in the past month. The price of a newly built home in May was $449,000, up 15% from a year ago. In the Northeast, builder sentiment on a three-month moving average fell 6 points to 65.

The West saw the largest decline, falling 12 points to 62. The United States was the only region to see an increase in the number of people living in the United States. The number of Americans in the U.S. was up by 1.4 million to more than 1.9 million.

July’s reading was below all 31 estimates in a Reuters poll of economists, which had a median expectation for a decline to 65. Moreover, the 12-point drop was the second largest in series history dating to 1985, exceeded only by the 42-point plunge in April 2020 when most of the country was under a COVID-19 lockdown.

“Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Georgia, said in a statement. “In another sign of a softening market, 13% of builders in the HMI survey reported reducing home prices in the past month to bolster sales and/or limit cancellations.”

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