Home builder sentiment falls to its lowest level since June 2020.
The National Association of Home Builders (NAHB) cited housing affordability challenges, rising interest rates, and double-digit growth in material costs for a sharp fall-off in home builder sentiment for May.
Builder confidence in the market for newly-built single-family homes fell eight points to 69 in May, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today.
This is the fifth straight month that builder sentiment has declined and the lowest reading since June 2020.
“Housing leads the business cycle and housing is slowing,” said NAHB Chairman Jerry Konter, a builder and developer from Savannah, Ga. “The White House is finally getting the message and yesterday released an action plan to address rising housing costs that emphasizes a very important element long-advocated by NAHB – the need to build more homes to ease the nation’s housing affordability crisis.”
Looking at the three-month moving averages for regional HMI scores, the Northeast held steady at 72 while the Midwest dropped seven points to 62, the South fell two points to 80 and the West posted a six-point decline to 83.
“The housing market is facing growing challenges,” said NAHB Chief Economist Robert Dietz. “Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.”
The HMI index gauging current sales conditions fell eight points to 78, the gauge measuring sales expectations in the next six months dropped 10 points to 63, and the component charting traffic of prospective buyers posted a nine-point decline to 52.