Builder confidence, a key bellwether for economic conditions, fell for the eighth straight month this August, according to a new survey.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index survey of builder sentiment is conducted by asking a panel of builders to rate present single-family sales and single-family sales for the next six months on a scale of “good,” “fair” or “poor.” The survey also rates traffic of prospective buyers” on a scale of “high to very high,” “average” or “low to very low.” The House Market Index (HMI) is the weighted average of these three components.
Homebuilder confidence is experiencing the worst stretch of decline since the housing market crisis in 2007, Bloomberg reported. It declined 6 points to 49 in August, falling below the break even point of 50, the first time it has fallen beneath this point since May 2020. A number above 50 indicates that more individuals surveyed view the market conditions as good than poor.
All three components of the HMI fell to their lowest level since May 2020. Current sales conditions dropped seven points to 57, sales expectations in the next six months dropped 2 points to 47, and traffic of prospective buyers fell 5 points to 32.
“Ongoing growth in construction costs and high mortgage rates continue to weaken market sentiment for single-family home builders,” NAHB Chairman Jerry Konter said. (RELATED: ‘Took A Breather’: CNN Gets Ripped For Suggesting Inflation, At 8.5%, Is Something To Be Happy About)
August buyer traffic was 32, the lowest level since April 2014 except for the spring of 2020.
NAHB: Builder Confidence Turns Slightly Negative in August https://t.co/LSzqMh3Hbg pic.twitter.com/4WUPvPB4cW
— Bill McBride (@calculatedrisk) August 15, 2022
NAHB Chief Economist Robert Dietz blamed strict monetary policy from the Federal Reserve and high prices for the decline.
“The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011,” Dietz said.
Builder confidence fell by 12 to 55 in July, according to NAHB. The HMI fell for current sales conditions, sales expectations in the next six months, and traffic of prospective buyers.
Housing prices reached their highest rate of growth ever recorded in June, according to the S&P CoreLogic Case-Shiller National Home Price Index.