Builder confidence down for fourth consecutive month

Builder confidence in the new-home sales market dipped for the fourth month in a row, according to Wells Fargo and the National Association of Home Builders (NAHB).

The two organizations jointly maintain the NAHB/Wells Fargo Housing Market Index (HMI), which fell by two points to a reading of 77 in April.

HMI readings above 50 indicate that more builders view conditions as good rather than poor, so all things considered, the index still shows some confidence within the residential construction sector. But the reasons for the ongoing dip, per NAHB chairman Jerry Konter, aren’t exactly surprising. They include fast-rising interest rates, still-growing home prices and ongoing input issues.

“Despite low existing inventory, builders report sales traffic and current sales conditions have declined to their lowest points since last summer as a sharp jump in mortgage rates and persistent supply chain disruptions continue to unsettle the housing market,” said Konter, a builder and developer based in Savannah, Georgia.

“Policymakers must take proactive steps to fix supply chain issues that will reduce the cost of development, stem the rise in home prices and allow builders to increase production.”

As Konter noted, the HMI’s subindices that gauge current sales conditions and prospective buyer traffic have seen substantial decreases over the past few months. The component that measures sales conditions shed another two points in April, backtracking to a reading of 85. The buyer traffic component saw an even larger drop this month, decreasing by six points to a reading of 60. Builders do seem to hold some hope moving forward, as the subindex that measures sales expectations in the next six months rebounded somewhat from a 10-point drop in March, rising three points to a reading of 73.

“The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” said Robert Dietz, NAHB chief economist.


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