Builders' confidence in the nation's single- family housing market fell in July to the lowest level since the beginning of the Pandemic.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market index dropped 12 points to 55. It was the largest single-month drop in the history of the survey, with the exception of April 2020, when it plummeted 42 points to 30.
Since mortgage rates began moving higher, sentiment on the index has fallen 24 points. Since the beginning of the year, the average rate on the 30-year fixed mortgage has doubled.
After hitting a record high of 90 in November 2020, sentiment fell back to 80 in July of last year. Concerns about inflation and the economy are taking a toll on builder sentiment.
Sentiment about current sales conditions fell 12 points to 64, while sales expectations fell 11 points to 50, and sentiment about buyer traffic fell 11 points to 37. The last component is now in the red.
Robert Dietz is the chief economist of the NAHB. The homebuying population is priced out of the market.
Major publicly traded homebuilders addressed affordability in their latest earnings releases. The price of a new home in May was up 15% from a year earlier. In the coming months, that could change.
Jerry Konter, NAHB chairman and a home builder in Georgia, said that 13% of builders in the survey have reduced home prices in the past month to bolster sales or limit cancellation.
Konter said that builders are stopping construction because the cost of land, construction and financing exceeds the market value of the home.
The builder sentiment fell in the Northeast. Sentiment fell in the Midwest and the South. The western part of the country fell 12 points to 62.
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