The National Association of Home Builders warned Wednesday: Soaring inflation Higher mortgage rates slow down home sales, and CEO Jerry Howard calls this combination the “worst case.”
Howard saysVarney & Co.“On Wednesday, the cost of capital rose for both consumers and builders. He said” labor costs are still high, “as well as” labor availability. “
“The cost of building materials has risen 19% year-on-year,” he said.
Howard provided insights on the same day that the National Association of Home Builders fell for the sixth straight month in June. Builder trust in the market For newly built single-family homes. Howard pointed out new data, emphasizing that it was a “sign of a real slowdown.”
According to the National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI) released Wednesday, builder confidence fell by 2 points to 67. This is the lowest since June 2020.
The index ranges from 0 to 100, and prints above 50 show positive sentiment. Reads above 80 indicate strong demand.
NAHB Chairman Jerry Contour, Georgia’s builder and developer, warned in a news release: Obvious signs of a slowdown in the housing market In a high inflation, low growth economic environment. ”
“The entry-level market is particularly affected by lower affordable housing prices,” he said. “Constructors are more cautious as demand softens as mortgage rates rise. I’m taking it. “
According to Mortgage News Daily, the average interest rate on popular 30-year fixed mortgages exceeded 6% on Tuesday for the first time since 2008.
“Our field traffic is below 50,” Howard noted, pointing out that 50 is the equilibrium point.
“I think it’s a sign of a real slowdown,” he told the host. Stuart VerneyPlease note that housing “leads us to recession”.
He added, “Currently, the main thing we see in the transaction phase is that we need to put an escalator clause in everything.” This allows builders to cover unpredictable costs.
“For example, gas prices are rising every day, which is added to the cost of builders,” Howard said, and therefore these potential additional costs are to home buyers in accordance with the escalator clause of the contract. He said he could be passed on. ..
He explained that the escalator clause “basically says you have to pay what we pay and we confirm what we are paying”.