Washington, D.C.—Builder sentiment remains subdued as rising material costs, elevated mortgage rates and ongoing affordability challenges continue to strain the housing market, according to the National Association of Home Builders (NAHB).
Builder confidence in the market for newly built single-family homes fell two points to 35 in June according to the NAHB/Wells Fargo Housing Market Index.
Sentiment has remained below 40 for 14 straight months. The index has not recorded a streak that long since 2011-12 during the foreclosure crisis.
“With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building,” said Bill Owens, chairman of the NAHB and a home builder and remodeler from Worthington, Ohio. “Congress can help by passing the major housing package now before the Senate, along with the CONSTRUCTS Act to address the construction labor shortage and the Energy Choice Act to prevent state and local bans on natural gas in new homes.”
Robert Dietz, NAHB chief economist, added, “Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply. According to a new NAHB study, government regulation, taxes, fees and other costs add more than 26% to the price of an average single-family home. Easing permitting bottlenecks, density limits and inefficient zoning rules would help reduce costs and support the housing growth the nation needs.”
Survey results
The latest HMI survey found that 35% of builders cut prices in June, up from 32% in May. The average price reduction remained at 6% in June. Builders used sales incentives in 62% of transactions, up from 61% in May. This marked the 15th consecutive month that the share reached 60% or higher.
NAHB has conducted the monthly survey for more than 40 years. The NAHB/Wells Fargo HMI measures builder perceptions of current single-family home sales and sales expectations for the next six months.
Builders rate those conditions as “good,” “fair” or “poor.” The survey also asks builders to rate prospective buyer traffic as “high to very high,” “average” or “low to very low.”
NAHB uses the component scores to calculate a seasonally adjusted index. Any reading above 50 means more builders view conditions as good than poor. The HMI index measuring current sales conditions fell two points to 38 in June. The index measuring future sales remained at 45. The index tracking prospective buyer traffic also remained unchanged at 25.
On a three-month moving average, the Northeast rose two points to 44. The Midwest remained at 43, the South fell two points to 33 and the West dropped one point to 27.