By Mike Sunnucks | Rose Law Group Reporter
Home builders confidence is dipping as inflation, affordability challenges and higher interest rates challenge real estate markets.
A new confidence index released by the National Association of Home Builders Tuesday dropped by eight points in May.
The NAHB/Wells Fargo Housing Market has declined for five straight months and its lowest level since June 2020.
“Housing leads the business cycle and housing is slowing,” said NAHB Chairman Jerry Konter, a builder and developer from Savannah, Georgia. “The White House is finally getting the message and yesterday released an action plan to address rising housing costs that emphasizes a very important element long-advocated by NAHB – the need to build more homes to ease the nation’s housing affordability crisis.”
The highest U.S. inflation in 40 years — including record-high gasoline and fuel prices — along with supply challenges and rising prices are problematic for a housing market that displayed record sales and robust price hikes during the COVID pandemic.
“The housing market is facing growing challenges,” said NAHB Chief Economist Robert Dietz. “Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.”
The Federal Reserve Bank has raised interest rates 0.75 points this year in two hikes and is slated to hike rates more to combat inflation. That will raise mortgage costs.