Builder confidence slips amid high mortgage rates, weak demand

Builder confidence in the market for newly built single-family homes slipped this month as high mortgage rates, weak buyer traffic and supply-side challenges continued to weigh on the housing market, according to the National Association of Home Builders..The NAHB/Wells Fargo Housing Market Index fell one point to 32, marking its 16th straight month of negative sentiment. Confidence has been between 32 and 34 since May.“Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” said NAHB Chair Buddy Hughes. Regulatory hurdles are adding to construction delays and costs, he added. Thirty-seven percent of builders reduced home prices, consistent with the past three months, with average cuts of 5 percent. Sales incentives rose to 66 percent, the highest level since the pandemic.NAHB Chief Economist Robert Dietz urged the Federal Reserve to cut interest rates, saying lower financing costs would help housing construction and indirectly ease mortgage rates. Federal Reserve Chair Jerome Powell said Aug. 25 that the first interest rate cut in nearly a year is possible next month amid concerns over labor market conditions. New residential construction activity was mixed last month, with housing starts climbing while permits fell, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.Privately-owned housing starts increased 5.2 percent from June to a seasonally adjusted annual rate of nearly 1.43 million units, up nearly 13 percent from July 2024. Single-family starts increased 2.8 percent to a rate of 939,000, while multifamily construction reached 470,000.Building permits, which are considered a key measure of future construction, fell 2.8 percent to 1.35 million units, 5.7 percent under its year-ago mark. Single-family permits increased 0.5 percent to 870,000. Completions increased 6 percent to nearly 1.42 million units, but were still down 13.5 percent from July 2024. Single-family completions increased 11.6 percent to a little more than 1 million units, while multifamily completions totaled 385,000.