Builder sentiment dropped from 45 in May to 43 in June 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.
All three components of the homebuilder index decreased, with current sales conditions falling three points to 48; buyer traffic decreasing two points to 28; and sales expectations in the next six months falling four points to 47.
High interest rates on home loans reportedly are deterring potential customers, and more builders had to cut home prices to lure buyers.
“Persistently high mortgage rates are keeping many prospective buyers on the sidelines,” said NAHB Chairman Carl Harris. “Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.
“The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation’s housing supply,” he continued. “A more favorable interest rate environment for construction and development loans would help to achieve this aim.”
Twenty-nine percent of builders reported cutting prices in June, which is up from 25% in May. The average price discount is holding at 6% for the 12th straight month.
