As confidence in the housing market declines, more builders are turning to sales incentives to entice homebuyers
June 20, 2024
Image: ungvar / stock.adobe.com
Builder confidence in the single-family home market is low due to affordability challenges.
Builder confidence is at the lowest it's been since December 2023, according to the National Association of Home Builders’ (NAHB) Eye On Housing blog. With rising mortgage rates keeping buyers out of the market, builder confidence scored a 43 on the NAHB/Wells Fargo Housing Market Index, down two points from May.
The report also found 29% of builders cut home prices to improve June sales, compared with just 25% in May. The average price reduction in June remained at 6% for the 12th straight month, but the number of builders using sales incentives increased to 61% in June from 59% in May.
The economy, and monetary policy more directly, is in an unusual situation because a lack of progress on reducing shelter inflation, which is currently running at a 5.4% year-over-year rate, is making it difficult for the Federal Reserve to achieve its target inflation rate of 2%. The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation’s housing supply. A more favorable interest rate environment for construction and development loans would help achieve this aim.
