- Builder sentiment in the single-family home market rose one point to 56 in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
- It marks the seventh consecutive month of gains and the highest level since June 2022. A reading above 50 is considered positive sentiment.
- Builders say low supply in the resale market is driving demand for new homes.
Builder sentiment in the single-family home market rose one point to 56 in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
It marks the seventh consecutive month of gains and the highest level since June 2022. A reading above 50 is considered positive sentiment.
Builders say low supply in the resale market is driving demand for new homes, but higher mortgage rates and supply-side challenges continue to put pressure on the market.
“Although homebuilders remain cautiously optimistic about market conditions, the quarter-point rise in mortgage rates over the past month is a stark reminder of the stop-and-start process the market will see as the Federal Reserve approaches the end of the month.” ongoing tightening cycle,” said Robert Dietz, chief economist at NAHB.
The average interest rate for the popular 30-year fixed-rate mortgage briefly exceeded the 7% mark in May and again at the end of June. It has only fallen slightly in the last week. These higher interest rates are weighing on affordability in the market, where existing home prices are rising again.
Of the three components of the NAHB index, the current turnover terms rose one point to 62 in July; Buyer traffic rose three points to 40, the highest since June last year; and sales expectations in the next six months fell two points to 60. The drop in expectations is due to the rise in interest rates and the resulting impact on affordability.
However, despite higher mortgage interest rates, builders are offering fewer incentives. Only 22% of home builders said they cut prices in July. This is down from 25% in June and 27% in May.
According to the US Census Bureau, new home sales in May increased 13% compared to April and were 20% higher than in May 2022. The median price is down more than 7% compared to May last year, but this one median price may be skewed by the mix of homes sold, which is currently trending towards the low end.