According to data released by the National Association of Home Builders (NAHB) on Tuesday, confidence among U.S. house-builders has receded in August after a series of increases in recent months. The rise in mortgage rates is starting to have an impact on demand in the housing market.
Key Points from the Report:
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The NAHB’s housing-market index, which measures builder confidence in the single-family housing market, fell by six points to 50 in August from 56 in July. This is a reversal from seven consecutive months of increases earlier this year. The decline suggests that prospective house-buyers are being deterred by mortgage rates that are close to 7%.
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The reading was significantly lower than the expected value of 57, as anticipated by economists polled by The Wall Street Journal.
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The August survey revealed that builders are increasingly resorting to sales incentives to bolster demand, as the share of builders reducing prices rose to 25%. This marks a departure from the trend observed in recent months, where fewer builders were cutting prices.
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The diminishing demand serves as a reminder of the challenges presented by shelter inflation, according to NAHB Chief Economist Robert Dietz. Dietz stresses the importance of enacting policies at all levels of government to address the nationwide shortage of approximately 1.5 million housing units, which would help reduce housing inflation and alleviate the housing affordability crisis.
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Various components of the index also saw declines. The index measuring current sales conditions fell by five points to 57 from 62 in July, while the index gauging sales expectations over the next six months dropped by four points to 55. Additionally, the index tracking the traffic of prospective buyers decreased by six points to 34.
It is evident that high mortgage rates are starting to impair demand in the U.S. housing market. NAHB Chief Economist Robert Dietz emphasizes the need for comprehensive policies to address the housing shortage and alleviate the affordability crisis.