For the fifth consecutive month, homebuilder sentiment declined and now stands at the lowest level since June 2020.
Home Builder Sentiment Plunges – Again
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI,) the gauge of homebuilder sentiment in the US, homebuilders’ sentiment tumbled 8 points in May to 69, the steepest drop since April 2020.
All measurements of current home sales, expected sales and potential homebuyer traffic significantly deteriorated from April to May.
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Robert Dietz, chief economist with the NAHB, summarized the home building industry’s current state of affairs (mortgage rates climbing to their highest level since 2009, rising home prices, building materials increasing +19% y/y, and sharply higher labor costs) by saying, “The housing market is facing growing challenges…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 buyers are especially bearing the brunt of this rapid rise in mortgage rates.”
Housing Industry Getting Attention of White House
NAHB chair Jerry Konter said that housing’s affordability crisis has attracted attention from the White House.
Konter said, “Housing leads the business cycle and housing is slowing. 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.”
Whether or not this affordability plan put forth by the White House becomes a reality will, of course, be determined by support from and votes by Congressional leaders who are deeply fractured by political divides. Nothing is a sure thing.
Specifics of Homebuilder Sentiment by NAHB Measurements
All categories within the NAHB/Well Fargo homebuilders sentiment gauge dropped significantly from April to May 2022 for the fifth consecutive month.
Take a look:
- Current sales – down 8 points to 78
- Prospective buyer traffic – down 9 points to 52
- Sales expectations for next six months – down 10 points to 63
- The Northeast region of the country was the only region in which homebuilder sentiment did NOT decline. The Midwest HMI fell by 7 points to 62, the South HMI dipped two points to 80 and the West HMI dropped by 6 points to 83. (Any index over 50 points indicates that builders see industry conditions to be more favorable than not.)
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Thanks to National Association of Homebuilders, Wells Fargo and Bloomberg and Inman.
