Homebuilder confidence dropped for the fourth month in a row in April as rapidly rising interest rates combined with continued home-price increases and construction costs to sap sentiment, the National Association of Home Builders reported, citing the latest NAHB/Wells Fargo Housing Market Index (HMI).
April’s index of 77 was down two points from March’s reading, the NAHB said in a press release. March’s reading of 79 marked the first time the HMI had fallen below 80 since September 2021. Any reading above 50 indicates that more builders view conditions as good than poor.
The index’s measure of current sales conditions fell two points to 85, while the six-month sales-expectations measurement rose three points to 73 after a 10-point drop in March. The buyer-traffic component fell six points to 60.
Mortgage rates are up more than 1.9 percentage points since the start of the year and stand at 5%, the highest level in more than 10 years, the NAHB said. The unexpectedly quick increase in rates, coupled with rising home prices and materials costs have brought the market to an “inflection point,” the association said.
Regionally, the three-month moving average of the index fell three points in the Midwest to 69, two points in the South to 82 and one point in the West to 89. It rose one point in the Northeast.
The NAHB/Wells Fargo survey measures builder perceptions of current single-family home sales, as well as sales expectations for the next six months, as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” The results are then used to calculate the seasonally adjusted index.