Builder confidence fell sharply in July, the National Association of Home Builders said Monday. The NAHB attributed the fall to high inflation and rising rates, which are crushing mortgage demand. The drop is the seventh-straight monthly decline and the NAHB’s lowest-ever reading, excluding the early pandemic. Loading Something is loading.
High inflation and rising interest rates pushed home builder confidence lower for a seventh-consecutive month, bringing the index to its lowest level since the start of the pandemic, the National Association of Home Builders said Monday.
The NAHB/Well’s Fargo Housing Market Index fell 12 points to 55 for new single-family home builds in July, which is the lowest reading since March of 2020 and the second largest single-month decline in the history of the index. A survey above 50 usually means builders view current market conditions as more favorable than not.
Builder confidence has fallen in line with interest rate hikes from the Federal Reserve , which is desperately trying to tame inflation that has persistently risen to new highs each month. The latest consumer price index showed prices rose at the fastest pace in 41 years in June.
The NAHB also pointed toward supply chain constraints as adding pressure to the index, while 13% of builders surveyed reported lowering home prices, according to NAHB chair Jerry Konter.
“This was an accident waiting to happen,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note on Monday. “Homebuilders have been in denial about the extent of the drop in demand, despite mortgage applications falling by more than a quarter over the first half of the year, with no end in sight to the decline.”
Shepherdson added that buyers now have more choice in the market given the surplus supply of new homes, while the index could fall further.
“Pretty soon, anyone who has bought a home in recent months will be sitting on a loss,” he said.
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