Builder sentiment in the market for single-family homes fell into negative territory in August, as builders and buyers struggle with higher costs.
The National Association of Home Builders/Wells Fargo Housing Market Index dropped 6 points in August to 49. Anything below 50 is considered negative. This marks the eighth straight decline in the index.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz.
Construction on privately owned residential homes fell hard in July to the lowest reading since February 2021. July Housing Starts fell nearly 10% from July to an annual rate of 1.446 million units versus 1.540 million expected. Sales were down 18.4% from July 2021. Single-family starts fell 10.1% monthly and 18.5% annually. Building Permits, a sign of future construction, fell 1.3% to 1.674 million versus 1.650 million expected.
The biggest hurdle for buyers right now is affordability. Home prices have been climbing since the start of the pandemic, and the average rate on the 30-year fixed mortgage, which had hit historic lows in the first part of the pandemic, is nearly twice what it was at the start of this year. Home price growth has cooled somewhat in recent weeks, while mortgage rates have come down from highs.
National median home prices rose above $400,000 for the first time to $413,500. Home purchase applications are down about 40% from their 2021 high, about 20% from 2019. Average existing home sales are only down about 20% from 2021 high, 6% from 2019 average
The good news: more homes are coming on the market as sellers begin to realize the market shifts and mortgage rates continue to decline week over week.
If you pulled back at the beginning of this year from purchasing a home, now is the time to start having those conversations again.
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
