U.S. home builder confidence falls for the first time in 2023

Applied Energetics

15/08/2023 15:00

By Safiyah Riddle
       Aug 15 (Reuters) - U.S. home builder confidence weakened
in August for the first time this year, according to a report
released Tuesday, as record-breaking mortgage rates and
still-high housing prices discouraged prospective buyers. 
    The National Association of Home Builders/Wells Fargo
Housing Market Index retreated to 50 in August from a 13-month
peak of 56 in July. Builder confidence was largely undermined by
a drop in prospective buyer traffic, which fell to 34 in August 
from a year-long high of 40 in July. Economists polled by
Reuters expected builder confidence to remain unchanged at 56. 
    Builder confidence swelled in the first half of the year as
demand for new homes was propped up by a dearth of existing
homes on the market, despite the Federal Reserve's 525
basis-points worth of interest rate hikes since March 2022 that
pushed mortgage rates past 7% last month. Many current home
owners are locked into low mortgage rates, and have been
reluctant to put existing homes on the market amidst expensive
financing options.
    A quarter of all builders cut prices to bolster sales in
August, the first increase since March. On top of that,
builders' sales expectations for the next six months fell to 55
from 59 in July, suggesting the share of builders cutting prices
could increase further to incentivize buyers. More widespread
price cuts would be welcome news for the U.S. central bank's
campaign to tame inflation. 
    “Declining customer traffic is a reminder of the larger
challenge that shelter inflation is up 7.7% from a year ago and
accounted for a striking 90% of the July Consumer Price Index
reading of 3.2%. The best way to bring housing inflation down
and ease the housing affordability crisis is to enact policies
at all levels of government that will allow builders to
construct more homes to address a nationwide shortfall of
approximately 1.5 million housing units.” said NAHB chief
economist Robert Dietz.

 (Reporting by Safiyah Riddle; Editing by Chizu Nomiyama)
 ((Safiyah.riddle@thomsonreuters.com;))