as Mortgage Rates Rise
- Homebuilder confidence fell for the seventh straight month in July.
- Details of the report were terrible. Homebuilder confidence fell in the four major regions.
- Housing market activity will soften into 2023.
Homebuilder confidence fell for the seventh straight month in July as the NAHB Housing Market Index collapsed to 55 from 67 in June. July’s reading marks the lowest level of homebuilder confidence since May 2020. The NAHB index remains solid, above the 50-point threshold.
Details of the report were terrible. The current sales conditions component which makes up 60% of the index fell to 64 in July, the lowest level since June 2020, from 76 in June. The future (next six months) sales conditions component collapsed to 50, the lowest level since May 2020, from 61 in June. The prospective buyers traffic component sank to 37, the lowest level since May 2020, from 48 in June. Homebuilder confidence declined in the four major regions.
The sharp increase in mortgage rates this year, expectations for higher mortgage rates, and rising input costs continue to weigh on the housing sector. Still, a constrained housing supply should support homebuilding this year.
New residential construction data for May from the Census Bureau showed that the number of houses approved for construction that are yet to be started increased to 283,000, slightly below the record-high 290,000 reached in March. Also, existing-home inventory continues to improve as the sharp increase in mortgage rates keeps some potential buyers on the sidelines. With interest rates set to rise further, housing market activity will soften into 2023.
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