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While continuing concerns about affordability may be affecting confidence in the home building sector, there's a glimmer of good news for new-home builders as a lack of resale inventory from prospective sellers who are pulling back from the for-sale market is helping to drive up demand for new construction, the National Association of Home Builders' Eye on Housing reports. Even so, according to the NAHB/Wells Fargo Housing Market Index, builder confidence took a hit in August, falling six points to 50, after posting seven consecutive monthly increases. Rising mortgage rates and persistently high shelter inflation are to blame, as they continue putting a damper on consumer demand.
The August HMI survey also revealed that rising mortgage rates are causing more builders to use sales incentives to attract home buyers. After dropping steadily for four months (from 31% in March to 22% in July), the share of builders cutting prices to bolster sales rose again to 25% in August. The average decline for builders reducing prices remained at 6%. And the share of builders using incentives to bolster sales was 55% in August, higher than in July (52%) but still lower than in December 2022 (62%).
All three major HMI indices posted declines in August. The HMI index gauging current sales conditions fell five points to 57, the component charting sales expectations in the next six months declined four points to 55, and the gauge measuring traffic of prospective dropped six points to 34.
