The National Association of Home Builders’ July survey saw the biggest drop in confidence among homebuilders in the index’s nearly four-decade history, excluding the early days of the pandemic. .
Rising material costs. A supply chain mess. A labor shortage. These were the big challenges Birmingham, Alabama homebuilder Alicia Huey said she was already facing.
“We live every day trying to keep our heads above water because it takes a lot longer to build a house these days,” Huey said.
Huey, who is also the first vice president of the NAHB, said that with the Federal Reserve raising interest rates pushing up mortgage rates, “it’s pushed a lot of people out of the market.”
Confidence fell from a reading of 67 to 55 in the NAHB survey, in which 13% of builders said they had cut prices to encourage sales.
As the housing market shows signs of running out of steam, some builders are considering putting projects on the rental market. And the United States needs more affordable rentals, said Barbara Fields, vice president of Abt Associates.
“Since the last recession, we just haven’t been able to build to the level that we need to,” Fields said.
About 10% of single-family home construction is dedicated to rentals, said NAHB chief economist Robert Dietz, “whether the builder owns the home and rents it or sells it to an investor. That’s about triple the historical market share. And we expect that part of the industry to grow as interest rates remain high.
The inventory of homes for sale is also up, said Bill McBride, who analyzes housing data for his blog, Calculated Risk.
“It’s really going to have an impact on the housing market,” he said. “We’re going to see areas with price drops.”
This will likely happen in local markets that have seen some of the steepest price increases during the pandemic.
There’s a lot going on in the world. Through it all, Marketplace is there for you.
You rely on Marketplace to break down world events and tell you how it affects you in a factual and accessible way. We count on your financial support to continue to make this possible.
Your donation today fuels the independent journalism you rely on. For just $5/month, you can help maintain Marketplace so we can keep reporting on the things that matter to you.