A contractor is working on a new home under construction in Tucson, Arizona, USA, on Tuesday, February 22, 2022. Sales of new homes in the United States fell in January after a burst of purchases in late 2021, which which indicates an increase in mortgage rates. it may be starting to restrict demand.
Rebecca Noble | Bloomberg | Getty Images
Confidence among builders in the country’s single-family housing market fell in July to the lowest level since the start of the pandemic.
The National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI), a survey designed to assess market conditions, found that homeowners ’sentiment fell 12 points to 55. That marked the biggest drop in a single month in the 37 years of the survey. history with the exception of April 2020, when reading plummeted 42 points to 30 after the onset of the Covid-19 pandemic.
Any rating above 50 on the index is still considered positive, but now sentiment has fallen 24 points since March, when mortgage rates began to rise. The average 30-year fixed-rate mortgage rate has almost doubled since January and is now below 6%.
Sentiment stood at 80 in July last year after hitting a record high of 90 in November 2020, when the pandemic caused a housing purchase eruption among people looking for more space in lesser areas. urban. Now, concerns about inflation and the recession are among the factors affecting builders ’sentiment.
Of the three components of the index, builders ’sentiment on current sales conditions dropped 12 points to 64, while sales expectations for the next six months fell 11 points to 50 and sentiment on traffic of buyers decreased 11 points to 37. The latter component is now solidly negative. territories.
“Affordability is the biggest challenge facing the housing market,” said Robert Dietz, chief economist at NAHB. “Significant segments of the home buying population have an out-of-market price.”
Some of the leading listed home builders addressed accessibility to their latest earnings posts, saying they would work with buyers to fit the tightest budgets. But the price of a newly built home in May was $ 449,000, up 15% from a year ago. That may change in the coming months.
In another sign of a softer market, 13% of builders in the HMI survey reported a drop in house prices over the past month to increase sales or limit cancellations, according to Jerry Konter, president of NAHB and home builder in Savannah, Georgia.
“Bottlenecks in production, rising housing construction costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the house, ”Konter said.
In the northeast, the sentiment of builders with a three-month moving average fell 6 points, to 65. In the Midwest, sentiment fell 4 points to 52 and sentiment in the south fell 8 points to 70. The West experienced the biggest drop, with 12 points. at 62.