The National Association of Home Builders/Wells Fargo housing market index fell to 69 from 77 in April, its lowest point since June 2020. It marks the fifth consecutive month the index has fallen.
“Construction materials costs are 19% higher than a year ago, in less than 3 months mortgage rates have risen to their highest point in 12 years,” the spokesperson said. NAHB chief economist Robert Dietz. “And based on current affordability terms, less than 50% of new and existing home sales are affordable for an average family.”
Housing market index falls to lowest since June 2020
President Joe Biden released the Housing Action Plan on May 16. The plan is intended to improve the supply of affordable housing over the next 5 years.
“The NAHB has been urging the government in recent months to address this vital national concern,” said NAHB Chairman Jerry Kontak. He noted that in late April, more than 10,000 housing industry representatives sent letters to Biden requesting a response. “The plan contains many positive elements that would help address many affordability challenges and improve financing options.”
“We agree with the White House that the key to solving our nation’s affordability problems is to build more homes,” Kontak added.
The May NAHB/Well Fargo Housing Market Index Report
NAHB members are surveyed monthly. They are asked to provide an assessment of the market conditions for the sale of single-family homes, both now and within the next 6 months, and a confidence level of the traffic of potential buyers. The ratings are good, fair or bad. The NAHB calculates the index using a formula that includes seasonal adjustments.
These are the regional figures of the Housing Market Index:
- Northeast: 76
- Midwest: 51
- South: 76
- West: 73
The average for those four regions is 69.
Is the housing market slowing down?
What does the index indicate? The sharp drop in the index indicates that builders’ confidence is waning. It is also an indication that the housing market is starting to slow down.
According to the NAHB, the ongoing downturn in the housing market is due to affordability challenges: rising interest rates, double-digit price increases for materials and house prices (including existing inventory).
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