Homebuilder confidence dips for eighth straight month
Record home prices and elevated interest rates caused homebuilder confidence to fall for the eighth straight month in August, according to a new survey.
The housing market index calculated by the National Association of Home Builders (NAHB) and Wells Fargo dipped six points this month and turned negative for the first time since May 2020. The eight-month streak of declines marks the worst stretch since the 2007 housing market crash.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” NAHB chief economist Robert Dietz said in a statement, adding that the total number of housing starts will decrease this year for the first time since 2011.
Nearly 7 in 10 home builders surveyed said that higher interest rates are the driving force behind weaker demand for houses. One in five reported having to reduce prices over the past month to boost sales or prevent cancellations.
Dietz noted that long-term interest rates have stabilized recently, providing some hope that demand will recover, particularly if red-hot inflation eases.
Home builders have been warning for months that while many Americans want to buy a house, they are often priced out of the market, as affordable homes often aren’t profitable in the current environment. The recent construction slowdown will further constrict supply, a major factor behind record housing prices.
Home sales dipped for the fifth straight month in June but prices ticked up for the 124th straight month, according to the National Association of Realtors.
On the other hand, the housing market in some areas is slowing rapidly, prompting fears that prices could collapse. The NAHB survey found that buyer traffic hit the lowest level since 2014 and that homebuilder confidence declined the most in the West and Northeast, where prices are highest.