Builder sentiment dropped from 43 in June to 42 in July as mortgage rates remained in the 7% range; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to NAHB. It reached a record high of 90 in November 2020.
Two of the three components of the homebuilder index decreased, with current sales conditions falling one point to 47 and buyer traffic decreasing one point to 27. Sales expectations in the next six months rose one point to 48.
High interest rates on home loans reportedly are deterring potential customers, and more builders had to cut home prices to lure buyers.
Thirty-one percent of builders reported cutting prices in July, which is up from 29% in June. The average price discount is holding at 6% for the 13th straight month. Sixty-one percent of builders were using sales incentives other than price cuts to improve sales in July.
“While buyers appear to be waiting for lower interest rates, the six-month sales expectation for builders moved higher, indicating that builders expect mortgage rates to edge lower later this year as inflation data are showing signs of easing,” said NAHB Chair Carl Harris.
