The residential construction industry could be on the verge of a substantial slowdown as elevated inflation and supply chain constraints forced many builders to halt new home construction in July, Forbes reports. Builder confidence in the new home market posted its seventh consecutive monthly decline in July after falling 12 points to 55, its second-largest single-month drop in the data’s history, according to the most recent NAHB/Wells Fargo Housing Market Index.
In some cases, the cost of land, construction, and financing exceed a home’s market value, leaving little incentive for building new homes in a frazzled economy. Home builder expectations for current and future sales also fell sharply as many regional builders anticipate less buyer traffic and greater affordability concerns in the months ahead.
In emailed comments, Pantheon Macro chief economist Ian Shepherdson said confidence has “further to fall,” noting that Federal Reserve Chair Jerome Powell last month alluded to the housing market’s “complicated situation,” saying potential home buyers "need a bit of a reset" as mortgage rates normalize at higher levels after remaining historically low during the pandemic.