Homebuilders say U.S. is in a ‘housing recession’ as sentiment turns negative

A worker drills plywood on a single family home under construction in Lehi, Utah, on Friday, Jan. 7, 2022.

The builder sentiment in the market for single- family homes fell into negative territory in August.

The National Association of Home Builders/Wells Fargo Housing Market index fell 6 points to 49 this month. Positive is defined as anything over 50. Since the beginning of the Covid epidemic, the index has not been in negative territory. It hadn't been negative in over a year.

Robert Dietz of the NAHB saidTighter monetary policy from the Federal Reserve has brought on a housing recession.

Current sales conditions fell 7 points to 57, sales expectations fell 2 points to 47, and buyer traffic fell 5 points to 32.

Despite higher costs for land, labor and materials, about 1 in 5 builders lowered prices in the past month to increase sales or limit cancellation. The average decline was 5%.

Affordability is the biggest obstacle for buyers. Mortgage rates have come down from highs while home price growth has slowed.

There will be a decline in the total volume of single- family starts. Dietz said that long-term interest rates will provide some stability for the demand side of the market in the coming months as signs grow that the rate of inflation is near a peak.

On a three-month moving average, builder confidence in the Northeast fell 9 points to 56 and in the Midwest fell 3 points to 49. In the South it fell 7 points and in the West it fell 11 points.