Rising inflation and higher mortgage rates are slowing traffic of prospective home buyers and putting a damper on builder sentiment, in “a troubling sign for the housing market,” the National Association of Home Builders said.
According to the latest monthly NAHB/Wells Fargo Housing Market Index (HMI), released this week, builder confidence in the market for newly built single-family homes posted its sixth straight monthly decline in June, falling two points to 67. This marks the lowest HMI reading since June 2020, according to the NAHB.
“Six consecutive monthly declines for the HMI is a clear sign of a slowing housing market in a high-inflation, slow-growth economic environment,” said 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,” observed NAHB Chief Economist Robert Dietz. “Residential construction material costs are up 19% year-over-year (while) 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 home buyers.”