As the housing market slows in the wake of rising interest rates, builder confidence is also steadily declining, Eye on Housing reports. Builder confidence in the single-family sector dropped for the fifth consecutive month in May, falling eight points to 69.
Lower sentiment is a direct result of elevated prices for building materials as well as a drop in buyer demand in the throes of a widening affordability crisis. The NAHB/Wells Fargo HMI index measuring current sales conditions fell eight points to 78, and more losses are expected in the months to come.
Housing is the business cycle, and the sector is particularly sensitive to changes for interest rates. And the housing market is facing growing challenges. Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.