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Homebuilders exhibited little optimism as the housing market showed little improvement month-to-month, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.
Builder confidence in the market for newly built, single-family homes fell one point month-over-month in July to 42 — the lowest score since December 2023, new data shows. Last year, builder confidence in both June and July exceeded 50 points.
“While buyers appear to be waiting for lower interest rates, the six-month sales expectation for builders moved higher, indicating that builders expect mortgage rates to edge lower later this year as inflation data are showing signs of easing,” NAHB Chairman and Wichita, Kansas, custom homebuilder Carl Harris said.
“Though inflation is still above the Federal Reserve’s target of 2 percent, it appears to be back on a cooling trend. 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,” NAHB Chief Economist Robert Dietz said. “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.”
Robert Dietz | National Association of Home Builders
According to Freddie Mac, mortgage rates averaging just under 7 percent in June, along with soaring rates for construction and development loans, forced builder sentiment to diminish as buyers moved away from the market.
In NAHB’s July data survey, 31 percent of homebuilders reduced home costs in July, up from 29 percent reported in June. The average price reduction plateaued in July at 6 percent for the 13th month straight. Sales incentives also remained the same month-over-month at 61 percent.
The index is derived from a monthly survey of homebuilders that asks builders to rate perceptions of single-family home sales and expectations for six months as “good,” “fair” or “poor,” homebuyer traffic as “high to very high” “average,” or “low to very low.”
In July, two of these categories showed a single-point drop while the third showed a single-point gain. Current sales conditions dropped to 47, prospective buyer traffic dropped to 27, and sales expectations increased to 48.
Three-month regional moving averages reflected in the HMI indicate the Northeast dropped six points to 56, the Midwest dropped four points to 43, the South dropped two points to 44 and the West dropped four points to 37.
