NAHB Housing Market Index Rises for Sixth Month in June Driven by Limited Supply

NAHB housing market index rose to 55 in June (consensus 51) from 45 in April and gave the highest reading and first time that sentiment levels have surpassed the midpoint of 50 since July 2022. December was the lowest level since mid-2012 with the exception of the spring of 2020.  Builder sentiment had declined every month in 2022. Inflation, though softer, is still striking out affordability for many. However, confidence is rising with a lack of resale inventory despite elevated interest rates. There is strong demand for new construction driven by the limited housing supply. All three major HMI indices posted gains in June. The HMI index gauging current sales conditions rose five points to 61

Location is critical and rent plays a part. Redfin reported in April that U.S. rents saw the first annual slump since the pandemic hit in March 2020.

United States NAHB Housing Market Index

US NAHB home builder sentiment June 2023

  • NAHB HMI 55 vs 51 expected Prior was 50
  • Current single-family home sales 61 versus 56 in May
  • Home sales over next 6 months 62 versus 57 in May
  • Index of prospective buyers versus 33 in May

“Builders are feeling cautiously optimistic about market conditions given low levels of existing home inventory and ongoing gradual improvements for supply chains,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. “However, access for builder and developer loans has become more difficult to obtain over the last year, which will ultimately result in lower lot supplies as the industry tries to expand off cycle lows.”

Share of builders reducing home prices continues trending down:

  • 25% of builders reduced home prices to bolster sales in June. The share was 27% in May and 30% in April. It has declined steadily since peaking at 36% in November 2022.
  • The average price reduction was 7% in June, below the 8% rate in December 2022.
  • 56% of builders offered incentives to buyers in June, slightly more than in May (54%), but fewer than in December 2022 (62%).

Regional HMI Scores

Looking at the three-month moving averages for regional HMI scores,

  • Northeast edged up two points to 47,
  • Midwest increased four points to 43,
  • South moved three points higher to 55
  • West posted a five-point gain to 46.

“Shelter cost growth is now the leading source of inflation, and such costs can only be tamed by building more affordable, attainable housing – for-sale, for-rent, multifamily and single-family,” he said. “By addressing supply chain issues, the skilled labor shortage, and reducing or eliminating inefficient regulatory policies such as exclusionary zoning, policymakers can play an important and much-needed role in the fight against inflation.”

Home Builder Earnings Reports:

About National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI)

Based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Source: NAHB

From The TradersCommunity News Desk