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Homebuilder sentiment takes historic plunge in July

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Contractor confidence in the national single-family home market fell to its lowest level in July since the pandemic began.

The National Association of Home Builders / Wells Fargo Housing Market Index found in a survey designed to measure market conditions that builders’ sentiment fell by 12 points to 55. This showed the largest one-month decline in the 37-year history of the survey, excluding April. In 2020, when the readings plummeted from 42 points to 30 points after the Covid-19 pandemic began.

Indexes above 50 are still considered positive, but sentiment has fallen by 24 points since March, when mortgage rates began to rise. The average interest rate on 30-year fixed mortgages has almost doubled since January and is now just below 6%.

The contractor is working on a new home under construction in Tucson, Arizona, USA on Tuesday, February 22, 2022. After a surge in purchases at the end of 2021, sales of new homes in the United States fell back in January. Demand may have begun to curb.

Rebecca Noble | Bloomberg | Getty Images

After hitting a record high of 90 in November 2020, the sentiment in July last year was 80. At this time, the pandemic caused a surge in home purchases among people looking for more space in less urban areas. Inflation and recession concerns are now one of the factors that hurt builders’ emotions.

Of the three elements of the index, builder sentiment about current sales was down 12 points to 64, and sales forecasts for the next 6 months were down 11 points to 50, sentiment about buyer traffic. Was down 11 points to 37. area.

“Affordability is the biggest challenge facing the housing market,” said Robert Dietz, Chief Economist at NAHB. “A significant portion of the homebuying population is priced by the market.”

Some major listed homebuilders have said they will work with buyers to tackle budget tightening by working on affordability with the latest revenue releases. However, the price of a new home built in May was $ 449,000, up 15% from a year ago. This is subject to change in the coming months.

Another sign of market softening is that 13% of HMI survey builders have reduced home prices in the past month, according to NAHB chairman and homebuilder Jerry Contour in Savannah, Georgia. Reported that it was strengthened or restricted to cancellation.

“Many builders have stopped building because of production bottlenecks, rising housing construction costs, and high inflation that cost land, construction, and financing to exceed the market value of housing,” Contour said. Said.

In the northeast, the builder’s sentiment on the 3-month moving average dropped by 6 points to 65. In the Midwest, emotions fell 4 points to 52, and emotions in the South fell 8 points to 70. Refers to 62.

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