Confidence among US builders fell in August as high home prices, construction costs and interest rates threatened housing affordability and dampened demand.
The National Association of Home Builders’ housing market index for August fell 6 points to 49, below economists’ forecasts of 55, according to a Refinitiv survey.
This is the first time since May 2020 that a reading has fallen below the balance threshold of 50.
“Tighter monetary policy by the Federal Reserve and persistently high 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 rates for potential buyers, current sales conditions and expectations in the next six months fell.
Prospective buyer traffic fell 16 points to 32 as more buyers are locked out of an expensive housing market.
Declining demand has forced about 19 percent of builders surveyed to cut prices last month to boost sales or limit cancellations. Most builders surveyed blamed higher interest rates for the drop in housing demand.
“The total volume of single-family starts will decline in 2022, the first such decline since 2011,” Dietz said. “However, as signs grow that the rate of inflation is about to peak, long-term interest rates have stabilized, which will provide some stability to market demand in the next few months.”