The National Association of Home Builders (NAHB) recently released its NAHB/Wells Fargo Housing Market Index (HMI) report for July, which gauges builder confidence on perceived single-family home sales and expectations for the future six months on a three-tiered scale: good, fair, or poor. The survey also asks builders how they think turnout will be among potential buyers on a three-tiered scale: high, average, or low. The survey has been conducted monthly for the last 30 years.
The NAHB reports that overall builder confidence in newly-built single-family homes dropped two points, from 66 to 64, which is the lowest the number has been since November 2016. Of those questioned, primary concerns were rising lumber prices, as well as other material costs. They also attributed the lack of confidence in the limited availability of land and labor, as well as the cost of both those commodities.
Of the three components that inform the main index, all three saw drops in July. The index that measures current sales fell two points, from 72 to 70; and the component that measures expectations over the next six months also dropped two points, from 75 to 73. The component that measures expected buyer traffic, however, only fell one point, from 49 to 48. Even though these numbers have dropped, the NAHB says the HMI components “are still in solid territory.”
The survey also examines HMI scores on a regional level. Using a three-month average, overall house market index in the Northeast rose a single point to 47, while the West and Midwest both fell a single point, to 75 and 66 respectively. The South took the biggest hit, with a loss of three points, setting it back to 67 points.