The National Association of Home Builders/Wells Fargo housing market index dropped to 69 from 77 in April, its lowest point since June 2020. It is the fifth straight month that the index has declined.
“Building material costs are up 19% from a year ago, in less than 3 months mortgage rates have surged to a 12-year high,” said NAHB chief economist Robert Dietz. “And based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family.”
Housing Market Index Drops to Lowest Since June 2020
President Joe Biden released the Housing Supply Action Plan May16. The plan is intended to improve the supply of affordable housing over the next 5 years.
“The NAHB has been urging the Administration to move on this vital national concern for the past several months,” said NAHB Chairman Jerry Kontak. He noted that late in April, more than 10,000 housing industry representatives sent letters to Biden asking for a response. “The plan contains many positive elements that would help address a host of affordability challenges and improve financing options.”
“We agree with the White House that the key to resolving our nation’s housing affordability challenges is to build more homes,” Kontak added.
The NAHB/Well Fargo Housing Market Index Report from May
NAHB members are surveyed monthly. They are asked to give a rating to market conditions for Single Family home sales, both at the present time and within the next 6 months, and a confidence level of prospective buyer traffic. The ratings are good, fair or poor. The NAHB calculates the index using a formula that includes seasonal adjustments.
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Here are the Housing Market Index regional numbers:
- Northeast: 76
- Midwest: 51
- South: 76
- West: 73
The average for those four regions is 69.
Is the Housing Market Slowing?
What Does the Index Indicate? The sharp drop in the index indicates that builder confidence is declining. It is also an indication that the housing market is beginning to slow.
According to the NAHB, the housing market’s continued downturn is do to affordability challenges: rising interest rates, double digit price increases for materials, and home prices (including existing stock).