Rising rates took a toll on builder confidence in August. The National Association of Home Builders (NAHB) said the NAHB/Wells Fargo Housing Market Index (HMI) dropped 6 points as rates neared 7 percent. The HMI, a measure of home builder confidence in the market for newly constructed homes, had risen for seven straight months but is now at 50. Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All three major HMI indices posted declines in August. The HMI index gauging current sales conditions fell 5 points to 57, the component charting sales expectations over the next six months declined 4 points to 55, and the gauge measuring traffic of prospective dropped from 40 to 34. Deitz said that declining customer traffic is likely a result of the 7.7 percent rise in shelter inflation over the last year. It accounted for a striking 90 percent of the July Consumer Price Index reading of 3.2 percent. “The best way to bring housing inflation down and ease the housing affordability crisis is to enact policies at all levels of government that will allow builders to construct more homes to address a nationwide shortfall of approximately 1.5 million housing units,” he said.
