Homebuilder sentiment is still in the dumps, according to the National Association of Home Builders’ August Housing Market Index (HMI).
The HMI, which measures confidence in the new-build market on a scale of 0 to 100, ticked up one point to 35, with builders particularly worried about homebuyer demand in the coming months.
Confidence in the current sales conditions increased two points to 39, while sales expectations for the next six months and traffic from prospective buyers remained unchanged at 43 and 23, respectively.
Robert Dietz | National Association of Home Builders
The report also revealed a continued softening in the new single-family home market, with 35 percent of homebuilders cutting prices during the month. The average price reduction remained steady at 6 percent, while the use of other sales incentives, like mortgage rate buy-downs, free upgrades or closing cost assistance, stayed at 63 percent.
NAHB Chief Economist Robert Dietz said August’s report marks the 16th consecutive month of HMI readings below 40, with mortgage and employment rates, material costs and inflationary pressures all contributing to weaker homebuyer demand. The lowest homebuilder sentiments were in the 90s and mid-2000s, after two major recessions temporarily crushed housing starts.
The HMI reached an all-time high of 90 in November 2020; however, it has struggled to rebound anywhere near the peak, as supply chain issues and tariffs on goods like Canadian softwood — a builder necessity — have hurt affordability.
NAHB’s report doesn’t bode well for the U.S. Census Bureau’s upcoming New Residential Construction report, which has been trending downward. Last month’s report showed slowing sales growth, declining sales prices and ballooning supply.
