Builder Confidence Reaches Inflection Point

MBA NewsLink Staff

Rapidly rising interest rates, combined with ongoing home price increases and higher construction costs, continue to take a toll on builder confidence and housing affordability, the National Association of Home Builders reported Monday.

The NAHB/Wells Fargo Housing Market Index reported builder confidence in the market for newly built single-family homes fell two points to 77 in April, marking the fourth straight monthly decline.

The HMI index gauging current sales conditions fell two points to 85; the component charting traffic of prospective buyers posted a six-point decline to 60. The gauge measuring sales expectations in the next six months increased three points to 73 following a 10-point drop in March.

Looking at the three-month moving averages for regional HMI scores, the Northeast posted a one-point gain to 72, while the Midwest dropped three points to 69, the South fell two points to 82 and the West edged one-point lower to 89.

“The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” said NAHB Chief Economist Robert Dietz.

The NAHB report is the second of several major housing reports this month. Last Thursday, the Mortgage Bankers Association’s Builder Applications Survey reported mortgage applications for new home purchases increased by 10 percent in March from February but fell by 5 percent from a year ago.

The MBA estimate of new home sales declined for the fourth consecutive month, with activity down 5 percent compared to February. MBA estimated new single-family home sales at a seasonally adjusted annual rate of 752,000 units in March, based on data from the BAS, a decrease of 4.9 percent from the February pace of 791,000 units. On an unadjusted basis, MBA estimated 74,000 new home sales in March, a 12.1 percent increase from 66,000 new home sales in February.

This morning (Tuesday), HUD and the Census Bureau issue their New Residential Construction report for March housing starts, permits and completions. On Wednesday, the National Association of Realtors releases its monthly Existing Home Sales report.

Next week sees the S&P CoreLogic Case-Shiller House Price Indices (Tuesday, Apr. 26); the New Residential Sales report from HUD/Census (Tuesday, Apr. 26); and the NAR Pending Home Sales Index (Wednesday, Apr. 27).