The National Association of Home Builders/Wells Fargo Housing Market Index slid to 50 in August from 56 in July. The dip from July’s 13-month high marked the first decline of 2023. Meanwhile, Bankrate data shows the typical 30-year fixed mortgage rate hit 7.53%, as of Monday. Loading Something is loading.
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Home builders are feeling more pessimistic than last month as climbing mortgage rates keep buyers on the sidelines, weighing on housing demand.
Builder sentiment fell six points to 50 in August, the National Association of Home Builders/Wells Fargo Housing Market Index showed Tuesday. It’s the first dip of 2023, and marks the lowest level since May.
Meanwhile, Bankrate data shows mortgage rates spiked Monday to 7.53%, up from 7.38% a week ago.
“Rising mortgage rates and high construction costs stemming from a dearth of construction workers, a lack of buildable lots and ongoing shortages of distribution transformers put a chill on builder sentiment in August,” NAHB Chair Alicia Huey said in a statement.
The NAHB’s gauge of prospective buyer traffic fell to 34 in August from 40 in July, and six-month sales expectations fell to 55 from 59 in.
The survey also illustrated that rising mortgages are leading more builders to slash prices in a bid to attract more buyers. The share of builders who cut prices climbed to 25% in August after dropping for four consecutive months — from 31% in March to 22% in July.
“Declining customer traffic is a reminder of the larger challenge that shelter inflation is up 7.7% from a year ago and accounted for a striking 90% of the July Consumer Price Index reading of 3.2%,” NAHB chief economist Robert Dietz said. “The best way to bring housing inflation down and ease the housing affordability crisis is to enact policies at all levels of government that will allow builders to construct more homes to address a nationwide shortfall of approximately 1.5 million housing units.”
Home values have appreciated so much that the share of homes worth $1 million or more is near an all-time high, according to Redfin. In a recent report, researchers pointed to tight inventory as the primary driver behind the rising proportion of seven-figure homes.
And the National Association of Realtors reported Monday that the price for a single-family home increased in more than half of metropolitan housing markets last quarter.