Builder sentiment dropped from a revised 41 in July to 39 in August as mortgage rates remained in the 7% range; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to NAHB. It reached a record high of 90 in November 2020.
Two of the three components of the homebuilder index decreased, with current sales conditions falling two points to 44 and buyer traffic decreasing two points to 25. Sales expectations in the next six months rose one point to 49.
High interest rates on home loans reportedly are deterring potential customers, and more builders had to cut home prices to lure buyers. The 30-year fixed-rate mortgage averaged 6.47% during the week ending Aug. 9, dropping from the previous week’s average of 6.73%.
Thirty-three percent of builders reported cutting prices in August, which is up from 31% in July. The average price discount is holding at 6% for the 14th straight month. Sixty-four percent of builders were using sales incentives other than price cuts to improve sales in August compared with 61% in July.
“Challenging housing affordability conditions remain the top concern for prospective home buyers in the current reading of the HMI, as both present sales and traffic readings showed weakness,” said NAHB Chair Carl Harris. “The only sustainable way to effectively tame high housing costs is to implement policies that allow builders to construct more attainable, affordable housing.”
