Builder confidence in the U.S. housing market posted a reading of just 35 out of 100 in August, barely moved from July, marking the sixteenth straight month the index has stayed below the neutral 50-point mark, according to the NAHB/Wells Fargo Housing Market Index. More than a third of builders, 35%, cut prices in August by an average of 6%, and 63% leaned on sales incentives just to keep contracts moving.
Key Points
- The Housing Market Index (HMI) registered 35 in August, up just one point from July, and has stayed below the 40-point mark for sixteen straight months, well under the neutral 50-point line where more builders would call conditions good than poor.
- NAHB Chief Economist Robert Dietz said “August marked the 16th straight month that at least 30% of builders reported cutting prices to support demand.”
- 35% of builders cut home prices in August, down slightly from 37% in July, with the average cut at 6%.
- Chairman Bill Owens pointed to input costs, saying “rising gas and diesel prices are pushing up material costs, and spec home building remains weak as many prospective buyers stay on the sidelines.”
- Confidence splits sharply by region: Northeast 44, Midwest 45, South 31, West 27.
- Of the index’s three components, prospective buyer traffic is the weakest link at just 23, while current sales conditions rose two points to 39.
What’s Included
- The HMI is built from three builder-reported components: current sales conditions, sales expectations over the next six months, and prospective buyer traffic.
- Those three scores combine into the single headline number on a 0-to-100 scale, where anything above 50 means more builders view conditions as good than poor.
- NAHB also publishes a regional breakdown as a three-month moving average, which is why the South and West, hit hardest by new-construction inventory, are dragging the national number down.
What Consumers Should Do
- Ask about price cuts directly. With over a third of builders already discounting, there’s no reason to accept a list price at face value in a new-construction community.
- Push for incentives, not just discounts. A rate buydown or covered closing costs can be worth more over the life of a loan than a small sticker-price reduction.
- Focus your search in the South or West if you have flexibility, since builder confidence, and therefore builder willingness to deal, is lowest in those regions right now.
- Don’t assume the market will get more expensive fast. Sixteen straight months below neutral is a long stretch of builders admitting demand is soft, which is leverage for buyers willing to negotiate.