The pandemic housing boom is over. Welcome to the housing recession.
That was the message from the National Association of Home Builders on Monday. The NAHB/Wells Fargo housing market index unexpectedly dropped six points to a reading of 49, below the breakeven point indicating a deteriorating market.
This is the eighth straight monthly decline for the index of homebuilder sentiment. Apart from a brief period at the start of the pandemic, this is the first below 50 reading since 2014.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,’ said NAHB chief economist Robert Dietz.
Economists had expected the index to maintain its July level of 55.
The index is comprised of three components. All three declined in August.
The index of current sales conditions fell 7 points to 57. Sales expectations in the next six months fell two points to 47. Buyer traffic cratered to 32, five points below the depressed level recorded last month. Apart from the spring of 2020, that’s the lowest level of buyer traffic since April of 2014.
“Ongoing growth in construction cots and high mortgage rates continue to weaken market sentiment for single-family home builders,” said NAHB chairman Jerry Konter.
Dietz said that the volume of single-family starts will decline in 2022, the first time housing starts have fallen year-to-year since 2011.
Nearly one-in-five home builders reported cutting prices in the past month to increase sales or limit cancellations. The average price cut among those cutting prices was five percent.