US homebuilder confidence fell in August, as high home prices, construction costs and interest rates threatened housing affordability and depressed demand.
The National Association of Home Builders’ housing market index for August dropped 6 points to 49, below economists’ forecasts of 55, according to a Refinitiv poll.
This is the first time since May 2020 that a reading has fallen below the break-even threshold of 50.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said Robert Dietz, NAHB chief economist.
The report’s housing market index showed that its indices of traffic for prospective buyers, current sales conditions and expectations in the next six months all fell.
Traffic from prospective buyers fell 16 points to 32, as more buyers are excluded from an expensive housing market.
Waning demand has forced about 19 per cent of homebuilders surveyed to reduce prices in the past month to increase sales or limit cancellations. The majority of builders surveyed blamed higher interest rates for the falling housing demand.
“The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011,” said Dietz. “However, as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilised, which will provide some stability for the demand side of the market in the coming months.”
Source: Financial Times