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As Affordability Concerns Mount, Builder Confidence Falls for Eighth Consecutive Month

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As Affordability Concerns Mount, Builder Confidence Falls for Eighth Consecutive Month

Buyers are backing out of home purchases thanks to elevated housing costs, and builders are responding by reducing their prices and slowing their pace of new construction starts

August 16, 2022
Builders in fluorescent vests holding hard hats
Image: Stock.adobe.com

Builder confidence fell for the eighth consecutive month in August as housing affordability challenges pushed the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) buyer traffic number to 32, the lowest level since April 2014, according to NAHB Eye on Housing.

In the midst of a housing recession, fewer buyers are diving headfirst into the single-family market, causing builders to reduce prices and to slow their pace of new construction starts. Demand is expected to rebound as long-term interest rates stabilize, but sales conditions remain low across all four regional markets.

Roughly one-in-five (19%) home builders in the HMI survey reported reducing prices in the past month to increase sales or limit cancellations. The median price reduction was 5% for those reporting using such incentives. Meanwhile, 69% of builders reported higher interest rates as the reason behind falling housing demand, the top impact cited in the survey.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell nine points to 56, the Midwest dropped three points to 49, the South fell seven points to 63 and the West posted an 11-point decline to 51. 

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