Builder confidence edged lower in June as ongoing affordability challenges continue to affect the housing market. The National Association of Home Builders (NAHB) Housing Market Index (HMI) fell 2 points from May to 35 this month, marking the 26th consecutive negative reading. The latest reading was lower than the forecast of 36.
The National Association of Home Builders Housing Market Index is a gauge of builder opinion on the relative level of current and future single-family home sales. The data is collected from a monthly survey of about 900 home builders asking respondents to, "rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes." It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.
“With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “Congress can help by passing the major housing package now before the Senate, along with the CONSTRUCTS Act to address the construction labor shortage and the Energy Choice Act to prevent state and local bans on natural gas in new homes.”
“Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply,” said NAHB Chief Economist Robert Dietz. “According to a new NAHB study, government regulation, taxes, fees and other costs add more than 26% to the price of an average single-family home. Easing permitting bottlenecks, density limits and inefficient zoning rules would help reduce costs and support the housing growth the nation needs.”
Here is the historical series, which dates from 1985.
Components of the the NAHB Housing Market Index
The NAHB Housing Market Index is calculated based off of three components: current sales, expected sales in the next six months, and traffic of prospective buyers. Here are the readings for June:
- Current sales fell two points to 38.
- Expected sales in the next six months were unchanged at 45.
- Traffic of prospective buyers was unchanged at 25.
Housing Market Index: Regional Breakdown
The chart below gives a regional breakdown of the NAHB HMI in four regions of the country: Northeast, Midwest, South, and West. Here are the readings for June:
- The Northeast rose six points to 50.
- The Midwest was unchanged at 45.
- The South fell seven points to 29.
- The West was unchanged at 27.
