Builder Sentiment Continues Decline In August

Builder confidence in the market for new single-family homes fell to 39 in August, down two points from a downwardly revised reading of 41 in July, the National Association of Home Builders (NAHB) and Wells Fargo reported in their latest Housing Market Index (HMI).

A lack of affordability and buyer hesitation from elevated interest rates and high home prices contributed to the decline in builder sentiment. All three HMI components in August remain below the key threshold of 50:

• Present sales conditions fell two points to 44.
• Expected sales in the next six months increased one point to 49.
• Traffic of prospective buyers declined two points to 25.

Additionally, the August survey revealed that builders are increasingly cutting prices to bolster home sales; 33% of builders did so in August compared to 31% in July and 29% in June. However, the average price reduction in August held steady at 6% for the 14th straight month.

The NAHB’s builder sentiment survey comes on the heels of separate findings that home builder credit tightened in the second quarter, rendering the construction of single-family homes more expensive. Average effective rates on loans for land acquisition and speculative single-family construction were the highest they’ve been since 2018.