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News July 27, 2022

Homebuilder sentiment plunges in July

Builder sentiment decreased 12 points to 55 in July, marking the largest single-month drop in the survey’s 37-year history except for April 2020, according to cnbc.com. It reached a record high of 90 in November 2020.

Any reading above 50 indicates a positive market; the National Association of Home Builders/Wells Fargo Housing Market Index had fallen to 30 in April 2020.

Of the homebuilder index’s three components, current sales conditions fell 12 points to 64; sales expectations in the next six months decreased 11 points to 50; and buyer traffic dropped 11 points to 37.

Homebuilder sentiment now has fallen 24 points since March, when mortgage rates began climbing. The average rate on the 30-year fixed mortgage has nearly doubled since January and now is just below 6%.

“Affordability is the greatest challenge facing the housing market,” said NAHB Chief Economist Robert Dietz. “Significant segments of the homebuying population are priced out of the market.”

NAHB Chairman Jerry Konter said 13% of builders in the survey reported reducing home prices during the past month to boost sales or limit cancellations.

“Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” Konter said.

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