Residential Real Estate News
U.S. Builder Confidence Moves Lower in August
In August 2024, U.S. builder sentiment declined due to affordability challenges and buyer hesitation caused by high interest rates and elevated home prices. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported builder confidence for newly built single-family homes at 39, a two-point drop from the revised July figure of 41. This marks the lowest confidence level since December 2023.
Nearly three-quarters of the August HMI responses were collected during the first week of the month, when interest rates averaged 6.73%, according to Freddie Mac. Interest rates dropped to 6.47% in the following week, the lowest since May 2023.
"Challenging housing affordability conditions remain the top concern for prospective home buyers in the current reading of the HMI, as both present sales and traffic readings showed weakness," said NAHB Chairman Carl Harris. "The only sustainable way to effectively tame high housing costs is to implement policies that allow builders to construct more attainable, affordable housing."
The August HMI survey also showed that 33% of builders reduced home prices to boost sales, up from 31% in July, the highest percentage in 2024. Despite this, the average price cut remained steady at 6% for the 14th consecutive month. Additionally, the use of sales incentives rose to 64% in August, compared to 61% in July, the highest since April 2019.
"With current inflation data pointing to interest rate cuts from the Federal Reserve and mortgage rates down markedly in the second week of August, buyer interest and builder sentiment should improve in the months ahead," said NAHB Chief Economist Robert Dietz.
The NAHB/Wells Fargo HMI, based on over 35 years of monthly surveys, assesses builder perceptions of current single-family home sales and future sales expectations, rating them as "good," "fair," or "poor." Builders also rate prospective buyer traffic as "high to very high," "average," or "low to very low." These scores are then used to create a seasonally adjusted index, with values above 50 indicating that more builders view conditions as favorable rather than poor.
In August, the index for current sales conditions fell by two points to 44, while the gauge for prospective buyer traffic dropped by two points to 25. However, the component measuring sales expectations for the next six months rose by one point to 49.
Looking at the three-month moving averages for regional HMI scores, the Northeast declined by four points to 52, the Midwest by four points to 39, the South by two points to 42, and the West remained steady at 37.
