Builder confidence in the market for newly constructed single-family homes remained stagnant at a low level in August, registering a score of 32 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), a one-point decline from July. This marks the 16th consecutive month that sentiment has remained below the break-even threshold of 50, indicating more builders view conditions as poor rather than favorable. The index has fluctuated narrowly between 32 and 34 since May, reflecting a prolonged period of stagnation driven by high mortgage rates, weak buyer demand, and persistent supply-side constraints. n nNAHB Chairman Buddy Hughes attributed the ongoing slump primarily to housing affordability, noting that potential buyers are hesitant to enter the market while financing costs remain elevated. He also cited regulatory hurdles in land development and construction as ongoing challenges for builders. n nRobert Dietz, NAHB’s chief economist, emphasized that housing affordability is a critical factor influencing broader economic growth and inflation trends. He urged the Federal Reserve to resume cutting the federal funds rate to lower construction financing costs and indirectly ease mortgage rates, which would help stimulate activity in the housing sector. n nSigns of a soft market continue to emerge: 37% of builders reported reducing home prices in August, down slightly from 38% in July. The average discount held steady at 5%, unchanged since November of the previous year. Meanwhile, the use of sales incentives rose to 66% in August from 62% in July—the highest level since the post-pandemic recovery period. n nThe HMI is derived from a monthly survey that has been conducted for over four decades. It measures builder perceptions of current sales conditions, expectations for the next six months, and traffic of prospective buyers. These components are combined into a seasonally adjusted index where readings above 50 indicate positive sentiment. In August, the index for current sales dipped to 35, while the six-month sales outlook remained unchanged at 43. Buyer traffic improved slightly, rising two points to 22, though it remains near historic lows. n nRegional trends showed mixed results. The three-month moving average for the Northeast declined to 44, the Midwest increased to 42, the South fell to 29, and the West dropped to 24. These figures underscore regional disparities in housing market resilience, with southern and western regions facing greater affordability pressures. n n— news from National Association of Home Builders | NAHB n
— News Original —nBuilder Confidence Plateaus at Relatively Low Leveln nElevated mortgage rates, weak buyer traffic and ongoing supply-side challenges continued to act as a drag on builder confidence in August, as sentiment levels remain in a holding pattern at a low level. n nBuilder confidence in the market for newly built single-family homes was 32 in August, down one point from July, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. Builder sentiment has now been in negative territory for 16 consecutive months and has hovered at a relatively low reading between 32 and 34 since May. n n“Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.” n n“Housing affordability is central to the outlook for economic growth and inflation,” said NAHB Chief Economist Robert Dietz. “Given a slowing housing market and other recent economic data, the Fed’s monetary policy committee should return to lowering the federal funds rate, which will reduce financing costs for housing construction and indirectly help mortgage interest rates.” n nIn further signs of a soft housing market, the latest HMI survey also revealed that 37% of builders reported cutting prices in August, down from 38% in July. This share has remained at 37% or 38% for the past three months. Meanwhile, the average price reduction was 5% in August, the same as it’s been every month since last November. The use of sales incentives was 66% in August, up from 62% in July and the highest percentage in the post-Covid period. n nDerived from a monthly survey that NAHB has been conducting for more than 40 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. n nThe HMI index gauging current sales conditions fell one point in August to a level of 35 while the component measuring sales expectations in the next six months held steady at 43. The gauge charting traffic of prospective buyers posted a two-point gain to 22 but remains at a very low level. n nLooking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 44, the Midwest gained one point to 42, the South dropped one point to 29 and the West declined one point to 24.