High Mortgage Rates, Construction Costs Bring Down Builder Confidence

High mortgage rates and elevated construction financing costs are dragging on builder confidence.

The National Association of Home Builders/Wells Fargo Housing Market Index hit its lowest reading of 43 in June for builder confidence for new single-family homes since December.

NAHB said the decreased confidence is due to higher rates for construction and development loans, chronic labor shortages and a scarce amount of buildable lots.

The June HMI survey also revealed 29% of builders cut home prices to bolster sales in June, the highest share since 31% in January and above last month’s rate of 25%.

The HMI is derived from a monthly survey NAHB has conducted for more than 35 years. It gauges builder perceptions of current single-family home sales and expectations for the next six months as “good,” “fair” or “poor.” Scores over 50 indicate more builders view conditions as good than poor.

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