Domestic Homebuilder Sentiment Falls Again

US Home Builder Sentiment Falls in Light of Hyper-Inflation

Home builder sentiment was reported to have fallen by 12 points in the recent report issued by the National Association of Home Builders. Conscious the drop represents the single largest decrease in the association’s history since starting the survey except for one month April 2020, when builder sentiment shed 42 points to 30, as a result of the pandemic.

In the Northeast builder sentiment fell only six points to 65, with 50 being the threshold determining positive versus negative. The Midwest fell to 52, South fell to 70, and the West saw a decline of 12 points to 62. There are a lot of reasons for the decline, such as the cost of buildable plots, supply chain bottlenecks, inflation, and the concern that buyer demand may not be as strong due to the rising interest rates. According to the National Association of Home Builders, the price of a newly built home in May was $449,000, up from a year ago by 15%. This represents the highest cost for a newly built single-family home.

Inflation has marched into the market as the single largest determining factor for the rising home prices. With 30-year mortgage rates climbing to nearly 6%, which is double from January of 2022, home buyers are having to recalibrate their budgets for home purchases. Last July home builder sentiment was reported to be 80, and this July home builder’s sentiment is now 55. This is still a positive environment for home building but considering that back in November 2020, the sentiment was 90, the market has clearly readjusted its outlook for the future. The market is still being throttled by supply chain issues and by the high price of fuel resulting from the shutdown of the XL pipeline by U.S. government officials.