Builder Confidence Edges Higher Despite Rising Rate Concerns

Home builder confidence increased slightly over the past month, posting a one-point gain to 56, the National Association of Home Builders/Wells Fargo Housing Market Index reported.

Builder confidence has increased for seven consecutive months to the highest level since June 2022, the report said.

“The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers,” said NAHB Chairman Alicia Huey, a home builder and developer from Birmingham, Ala.

But Huey noted builders are troubled over rising mortgage rates approaching 7% and continue to grapple with supply-side challenges, “including ongoing scarcity of electrical transformer equipment and growing concerns about lot availability.”

NAHB Chief Economist Robert Dietz said builders remain cautiously optimistic about market conditions but called the quarter-point rise in mortgage rates over the past month “a stark reminder of the stop and start process the market will experience as the Federal Reserve nears the end of the ongoing tightening cycle.”

The July HMI survey also revealed that despite elevated interest rates, builders’ use of sales incentives has declined, as the market has firmed and resale inventory options remain limited. Only 22% of builders report cutting prices in July. This is down from 25% in June and 27% in May.