The National Association of Home Builders has warned of a ‘housing recession’ as demand slows © Bloomberg
US homebuilder confidence fell in August as high home prices, construction costs and interest rates threatened housing affordability and depressed demand.
The National Association of Home Builders’ August housing market index fell 6 points to 49, below economists’ forecasts of 55, according to a Refinitiv poll.
This is the first time since May 2020 that a reading has fallen below the 50 break-even level.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have led to a housing recession,” said Robert Dietz, NAHB’s chief economist.
The report’s Housing Market Index showed that its traffic indices for potential buyers, current sales conditions and expectations all declined over the next six months.
Traffic from prospective buyers fell 16 points to 32 as more buyers are locked out of an expensive housing market.
Slowing demand has forced about 19 percent of homebuilders surveyed to cut prices over the past month to boost sales or limit cancellations. The majority of the builders surveyed blamed higher interest rates for the falling demand for housing.
“In 2022, the total volume of single-family starts will decline for the first time since 2011,” said Dietz. “However, as signs mount that inflation is peaking, long-term interest rates have stabilised, which will provide some stability to the demand side of the market in the coming months.”
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