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NAHB: Builder Confidence Dropped Further in June

The builder association’s measure of attitudes has dropped for six months in row, hitting 67 in June. But any number above 50 reflects optimism over pessimism.

WASHINGTON – Builders still side with optimism rather than pessimism, according to a monthly index, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). in June, it fell two points to 67

However, their positive attitudes have been on a slow decline, with the score dropping continuously over the last six months. June marks the lowest HMI reading in two years, since June 2020.

“Six consecutive monthly declines for the HMI is a clear sign of a slowing housing market in a high inflation, slow growth economic environment,” says NAHB Chairman Jerry Konter. “The entry-level market has been particularly affected by declines for housing affordability and builders are adopting a more cautious stance as demand softens with higher mortgage rates.”

“The housing market faces both demand-side and supply-side challenges,” adds NAHB Chief Economist Robert Dietz. “Residential construction material costs are up 19% year-over-year with cost increases for a variety of building inputs – except for lumber, which has experienced recent declines due to a housing slowdown. On the demand-side of the market, the increase for mortgage rates for the first half of 2022 has priced out a significant number of prospective homebuyers.”

All three HMI indices posted declines in June. The component charting traffic of prospective buyers fell 5 points to 48 – the first time this gauge fell below the breakeven level of 50 since June 2020.

The HMI index gauging current sales conditions fell one point to 77, and the gauge measuring sales expectations over the next six months fell two points to 61.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 71, the Midwest dropped six points to 56, the South fell two points to 78 and the West posted a nine-point decline to 74.

The NAHB/Wells Fargo HMI gauges builder 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 traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

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