Home builders’ sentiment shows little optimism about the anticipated traffic from prospective new home buyers for the next six months. In fact, their confidence level in their business is at its lowest in 8 years.

According to the National Association of Home Builders/Wells Fargo Housing Market Index, only 31% of new home builders feel confident about interacting with prospective home buyers during that time period.

“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week, the highest level since 2008,” said NAHB Chief Economist Robert Dietz. “In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.”

Home Builders Confidence Lowest Since 2014

Overall, the Housing Market Index stands at 46%, its lowest point in a year, its lowest point since 2014 (except for May 2020). The overall HMI is an average of the anticipated traffic of new buyers, present single family home sales, and prospective single family home sales in the next six months.

The latest report is based on a survey of NAHB members in August. The members gave single-family home sales at the present a 46% rating and gave single-family home sales over the next six months a 54% rating.

Taken with the 31% “traffic of prospective buyers” rating, the overall HMI stands at 46%. For the report released in August, the overall HMI was 49%. The HMI has steadily declined for the past year.

NAHB Chairman Jerry Konter attributed the steady decrease in the HMI to elevated interest rates, supply chain problems and cost of new homes due to increased prices for materials.

HMI, by US Region

By region, the HMI rates those same three components (prospective single family home sales at present, single family home sales for the next six months, and traffic of prospective buyers for the next six months) and separates the responses by region.

By region, the South leads the US with an HMI of 52%, although that is the lowest rating in a year.

Here’s the breakdown:

South 52%
Northeast 48%
Midwest 42%
West 34%

Image: Depositphotos

This article, “Home Builders Confidence Lowest Since 2014, according the NAHB Housing Market Index” was first published on Small Business Trends