Builder Confidence Drops As Market Softens

Home builders have a unique perspective. Their business depends on being able to anticipate where and when home buyers are looking to make a move. Which means, they have to be able to read the market if they hope to be successful. That ability is why the National Association of Home Builders conducts a monthly survey tracking builders’ perception of the market for new homes. The NAHB’s Housing Market Index scores builders’ responses on a scale where any number above 50 indicates more builders see conditions as good than poor. In July, the index fell to 55. Jerry Konter, NAHB’s chairman, says survey responses indicate the market is beginning to soften. “Production bottlenecks, rising home building costs, and high inflation are causing many builders to halt construction because the cost of land, construction, and financing exceeds the market value of the home,” Konter said. “In another sign of a softening market, 13 percent of builders in the HMI survey reported reducing home prices in the past month to bolster sales and/or limit cancellations.” Despite a challenging market, though, the index component measuring current sales conditions was still largely positive, scoring a 64 in July. (source)

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