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Builder confidence in the market for newly built single-family homes fell two points to 35 in June amid rising material costs, elevated mortgage rates and continued affordability challenges impacting the housing market, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
“With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building,” says NAHB Chairman Bill Owens, a homebuilder and remodeler from Worthington, Ohio. “Congress can help by passing the major housing package now before the Senate, along with the CONSTRUCTS Act to address the construction labor shortage and the Energy Choice Act to prevent state and local bans on natural gas in new homes.”
This is the 14th consecutive month that sentiment has stayed under 40. The foreclosure crisis between 2011 and 2012 was the last time sentiment remained this low.
“Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply,” says NAHB chief economist Robert Dietz. “According to a new NAHB study, government regulation, taxes, fees and other costs add more than 26% to the price of an average single-family home. Easing permitting bottlenecks, density limits and inefficient zoning rules would help reduce costs and support the housing growth the nation needs.”
The HMI survey also found that 35% of builders cut prices in June, up from 32% in May. The average price reduction was 6% in June, the same rate as in May. The use of sales incentives was 62% in June, up slightly from 61% in May, marking the 15th consecutive month this share has reached 60% or higher.
The HMI index gauging current sales conditions fell two points to 38 in June, the index measuring future sales held steady at 45 and the index charting traffic of prospective buyers remained unchanged at 25.
Regionally, HMI scores in the Northeast rose two points to 44, the Midwest held constant at 43, the South fell two points to 33 and the West dropped one point to 27.
