Inflation took a bigger than expected bite out of homebuilder confidence in August.
U.S. homebuilder confidence fell in August to its lowest reading since July 2020, according to a report released on Tuesday.
The NAHB/Wells Fargo Housing Market index fell 5 points to a reading of 75 in August. Economists had expected the index to remain unchanged from the month prior.
“Higher construction costs and supply shortages along with rising home prices pushed builder confidence to its lowest reading since July 2020,” the National Association of Home Builders said Tuesday.
The measure of current sales conditions fell five points to 81. The index measuring traffic of prospective buyers also posted a five-point decline to 60. The component charting sales expectations in the next six months held steady at 81.
“Buyer traffic has fallen to its lowest reading since July 2020 as some prospective buyers are experiencing sticker shock due to higher construction costs,” said NAHB Chairman Chuck Fowke. “Policymakers need to find long-term solutions to supply-chain issues.
A reading above 50 means more single-family homebuilders view market conditions as favorable than poor. The index hit its all-time high of 90 in November 2020.
“While the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales,” said NAHB Chief Economist Robert Dietz. “While these supply-side limitations are holding back the market, our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions.”
Confidence was down in all four regions of the U.S., with the largest decline in the South. The South is the largest market for newly built homes.