US Homebuilder Sentiment Slumps to 13-Month Low Housing Affordability Declines

Despite the recent slump in lumber prices, homebuilders across the US continue to face added pressure amid ongoing supply chain disruptions and sky-high home prices.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) slumped from 80 to 75 in August, marking the lowest reading since July 2020. Of the index’s other components, sales expectations over the next six months remained unchanged at 81, while current sales conditions slumped 5 points to 81, and traffic of prospective buyers declined from 65 to 60.

Builders across the US have been facing rising material and labour costs, which in turn has pushed new home prices to even higher levels. As a result, an increasing number of potential homebuyers are being displaced from the market, which in turn has weighed down on homebuilder confidence. “While the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales,” said NAHB chief economist Robert Dietz.

According to data published by the NAHB, approximately 56% of new and existing homes sold between April and June could be afforded by households earning a median income of $79,900; this is a sharp decline from the 63.1% of homes purchased in the first quarter of the year, and the lowest affordability level on records dating back to 2012. “Some prospective buyers are experiencing sticker shock due to higher construction costs,” explained NAHB Chairman Chuck Fowke.

Information for this briefing was found via the NAHB. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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