Housing developers continue to face pressure from elevated borrowing costs, construction expenses and uneven buyer demand, keeping sentiment toward new single-family construction at subdued levels. The National Association of Home Builders/Wells Fargo Housing Market Index increased one point to 35 in August, but remained firmly below the level indicating generally positive builder conditions.
The HMI's current-sales component increased two points to 39 in August. The measure of sales expectations for the next six months held at 43, while the prospective buyer traffic index remained at 23.
Builder pricing activity showed some improvement but remained widespread. Thirty-five percent of surveyed builders reported reducing home prices in August, compared with 37% in July. The average reduction held at 6%. Sales incentives were reported by 63% of builders, unchanged from July.
August marked the 16th consecutive month in which at least 30% of builders reported reducing prices, according to the survey.
The HMI is based on monthly responses from single-family builders regarding current sales conditions, expected sales over the following six months and prospective buyer traffic. A score above 50 indicates that more builders view market conditions as good than poor.
Regional results continued to show differences in market conditions. Based on three-month moving averages, the Northeast HMI declined one point to 44 in August, while the Midwest remained at 45.
The South fell two points to 31, and the West was unchanged at 27. The Midwest continued to record the highest regional reading among the four major U.S. regions.
The survey also indicated that smaller, less-dense markets and smaller builders were reporting comparatively stronger conditions than larger metropolitan markets and larger builders. Custom home construction was also performing better than speculative homebuilding.
The August HMI points to continued challenges for residential construction businesses balancing home prices, incentives and construction costs against buyer demand. For developers and builders, the persistent sub-40 national reading highlights the ongoing importance of controlling project costs and monitoring local demand conditions as new-home markets remain uneven.
Source: NAHB.
