Both builders, customers are facing increased costs
The double impact of rising labor and materials costs for builders; and rising mortgage rates and prices for consumers; is weakening builders’ confidence in the market for single-family homes.
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell 8 points to 60 in October but despite the sharp drop, builder sentiment still remains in positive territory.
“Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La.
The cost of construction has meant builders pulling back on new supply in recent months to only a slow recovery as consumers also remained cautious.
“While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall,” said NAHB Chief Economist Robert Dietz.
All of the major HMI indices posted declines. The index measuring current sales conditions fell seven points to 67, the component gauging expectations in the next six months dropped 10 points to 65 and the metric charting buyer traffic registered an eight-point drop to 45.
“Recent policy statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low,” said Dietz. “Given that housing leads the economy, policymakers need to focus more on residential market conditions.”
