NAHB Housing Market Index Rises in July for Seventh Straight Month

NAHB housing market index rose to 56 in July (consensus 56) from 55 in June and gave the highest reading and second 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. 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 July 2023

  • NAHB HMI 56 vs 56 expected Prior was 55
  • Current single-family home sales 62 versus 61 in June
  • Home sales over next 6 months 60 versus 62 in June
  • Index of prospective buyers 40 versus 37 in June

“The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. “At the same time, builders are troubled over rising mortgage rates approaching 7% and continue to grapple with supply-side challenges, including ongoing scarcity of electrical transformer equipment and growing concerns about lot availability.””

Share of builders reducing home prices continues trending down:

  • Only 22% of builders report cutting prices in July. This is down from 25% in June and 27% in May.

Regional HMI Scores

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

  • Northeast edged up 5 points to 52,
  • Midwest increased 2 points to 45,
  • South moved 3 points higher to 58
  • West posted a 5-point gain to 51.

Given that shelter inflation accounts for roughly 40% of the Consumer Price Index, Dietz added the best way to ease this largest source of inflationary pressure is to build additional for-rent and for-sale housing. “There’s been some commentary linking gains for housing construction with increased concerns for additional inflation, but this has the economics backwards,” he said. “More housing supply is good news for future shelter inflation readings in the market. Furthermore, higher interest rates increase the cost of financing for building homes and developing lots.”

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