Confidence among U.S. builders of single-family homes slipped 3 points, to 39, in this month’s National Association of Home Builders/Wells Fargo Housing Market Index (HMI), issued Tuesday.
The index’s decline “from its most recent cyclical high of 72, in June of last year” NAHB Chief Economist David Seiders said in the report, “… reflects growing builder uncertainty on the heels of reduced sales and increased cancellations related to eroding affordability, as well as an ongoing withdrawal of investors/speculators from the marketplace.”
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“But just as concerning to many builders,” Seiders added, “is the potential for more monetary tightening by the Federal Reserve.”
That’s not something the NAHB expects, Seiders said. “We expect the Federal Reserve to maintain the current 5.25-percent target for the federal funds rate for some time, and we’re projecting only modest increases in long-term interest rates from current levels.”
“In terms of historical comparison,” he said, “the HMI’s movement is essentially in line with readings from the 1994-95 period when the Federal Reserve tightened monetary policy and a fairly orderly cooling-down process occurred in the nation’s housing markets.”
The HMI, derived from a monthly survey the NAHB has been conducting for 21 years gauges builder perceptions in three categories: current single-family home sales, sales expectations for the next six months, and traffic of prospective buyers.
Scores for each component used to calculate the seasonally adjusted index; any number over 50 indicates more builders view conditions as good than poor.
Nationwide, all three index components fell in July, the NAHB said. The largest decline was in sales expectations for the next six months, down 5 points to 46. Current sales of new single-family homes fell 4 points, to 43. Traffic of prospective buyers fell 2 points, to 27.
Regionally, the decline in confidence was greatest in the West, where the HMI fell 9 points to 51.
In the Northeast, the NAHB said builders’ confidence fell 5 points, to 36. In the South, however, it edged up 2 points, to 50.
