Builder confidence at 13-month low

Washington, DC — Higher construction costs and supply shortages, along with rising home prices, pushed builders’ confidence to its lowest level since July 2020, according to the NAHB/Wells Fargo Housing Market Index (HMI) released today. Construction sentiment in the market for new-build single-family homes fell by five points to 75 points in August.

“Buyer traffic has fallen to its lowest level since July 2020 as some potential buyers experience sticker shock due to higher construction costs,” said NAHB chairman Chuck Fowke. “Policymakers need to find long-term solutions to supply chain problems.”

NAHB chief economist, Robert Dietz, added: “While demographics and interest in home buying remain solid, higher costs and material access issues have resulted in lower levels of home construction and even a hold on new home sales. As these supply-side constraints are holding back the market, we expect production bottlenecks to ease in the coming months and the market to return to normal.”

Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo HMI polls builders’ 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 potential buyer traffic as “high to very high,” “medium,” or “low to very low.” The scores for each component are then used to calculate a seasonally adjusted index, with any number above 50 indicating that more builders view the conditions as good than bad.

The HMI index measuring current sales conditions fell five points to 81 and the component measuring potential buyer traffic also fell five points to 60. The meter charting sales expectations over the next six months , remained stable at 81.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 74, the Midwest fell two points to 68, the South recorded a three-point drop to 82, and the West recorded a two-point drop to 85 .

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