Top Takeaways:
- The Housing Market Index (HMI) registers its 6th consecutive monthly decline
- The industry is hit by both supply-side and demand-side challenges
- Average monthly principal and interest rates for a median-priced home have risen by $500 since January.
By Robert Isler
The National Association of Home Builders (NAHB) released its monthly NAHB/Wells Fargo Housing Market Index (HMI) yesterday and the trend continues to be troubling.
The index, one of several that the NKBA regularly tracks on its Insights page, posted its sixth consecutive monthly decline, falling to 67 from 69. This follows an eight point drop last month.
A measurement of builder confidence for moving forward, the current HMI is the lowest since June 2020. Also the lowest in two years: The HMI gauge that tracks traffic of prospective buyers, dropping five points to 48 and falling below the breakeven level of 50.
The NAHB/Wells Fargo Housing Market Index posted its 6th consecutive monthly decline and is now at its lowest level in two years.
“Six consecutive declines for the HMI is a clear sign of a slowing housing market in a high inflation, slow growth economic environment,” said NAHB Chairman Jerry Konter, adding that higher mortgage rates are causing builders to be more cautious and the government needs to implement more supportive policies. NAHB chief economist Robert Dietz spoke of both supply-side and demand-side challenges for the industry. This includes a 19 percent year-over-year rise in residential construction material costs, while sharp increases in mortgage rates this year are pricing out a substantial number of prospective home buyers.
Meanwhile, builders who attended the June 15th NAHB 2022 Legislative Conference in Washington, D.C., urged the government to enact policies that would ease the burden on the homebuilding industry. A main focus was the housing affordability crisis that is preventing builders from constructing more single-family homes and apartments to meet demand.
Among the impediments discussed: the sharp rise in the price of building materials, continuing supply chain issues, relentless increases in mortgage rates and excessive government regulations. According to the builders, government regulations account for nearly 25 percent of the price of building a home. Additionally, the record-high labor shortages in construction – 449,000 industry-wide – have resulted in delays and also contributed to higher home-building costs.
Adding to homebuilding and buying challenges, Fannie Mae estimates that monthly principal and interest payments for a median-priced home have jumped by $500 since January due to the rapid increase in mortgage rates. Specific actions requested of Congress included suspension of tariffs on Canadian lumber imports to ease material costs and government promotion and funding of job training programs that would entice individuals to pursue careers in the home building industry.