God save the homebuilders. And US housing more generally.
A pair of private-sector updates painted a gloomy picture of America’s property market on Thursday.
On the new construction side, NAHB builder sentiment printed a God-awful 34 for July, down from June and matching April’s headline for the worst print since September.
As the figure reminds you, this malaise is as deep as it is intractable. At no point during Donald Trump’s second term has the marquee gauge of builder moods been anywhere near territory indicative of net optimism.
July marks the 15th month below 40 for the index. That’s the worst such stretch in 14 years. There have been just four >50 prints since 2022.
“Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook,” NAHB Chairman Bill Owens remarked.
“Affordability remains the home building industry’s primary challenge,” the association’s long-time chief economist Robert Dietz sighed. “Elevated mortgage rates, costly land, rising material prices and persistent skilled labor shortages continue to affect the market.”
The NAHB’s gauge of future sales slipped to 43, the second-lowest since August. Nearly four in 10 builders cut prices in July, and nearly two-thirds offered incentives.
Meanwhile, even determined optimist Lawrence Yun, the NAR’s top economist, couldn’t spin a ghastly read on pending sales in the resale market, where contract activity plummeted nearly 5.5% in June against expectations for no change.
As the figure shows, the index is now back near the lows. The drop from May to June nearly erased the entirety of the gains notched over the preceding four months.
“The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers,” Yun lamented.
Redfin’s more timely data on pending sales told a similar story. Contract activity slipped 2.2% in the four weeks ended July 12, a Thursday update showed.
“First-time buyers are having a tough time breaking into the market,” an agent in Grand Rapids told Dana Anderson. “High mortgage rates mean that even homes in the most affordable price point are a stretch for a lot of buyers.”
Not to put too fine a point on it, but I predicted this two years ago. How many times, in 2024, did I insist on the notion that anyone who had $70,000 cash, near-perfect credit and an annual income of at least $120,000 (i.e., the boxes you need to check in order to afford the typical home) had already bought?
