“Although builders continue to remain cautiously optimistic about market conditions, the quarter-point rise in mortgage rates over the past month is a stark reminder of the stop and start process the market will experience as the Federal Reserve nears the end of the ongoing tightening cycle,” said Robert Dietz, chief economist of NAHB.
Dietz highlighted the importance of building additional for-rent and for-sale housing to ease inflationary pressures.
“There’s been some commentary linking gains for housing construction with increased concerns for additional inflation, but this has the economics backwards,” he said. “More housing supply is good news for future shelter inflation readings in the market. Furthermore, higher interest rates increase the cost of financing for building homes and developing lots.”
Despite rising interest rates, builders continued to pull back on sales incentives as the new home construction market heats up and resale inventory options remained limited. Only 22% of builders reported cutting prices in July, down from 25% in June.
Additionally, NAHB’s survey revealed that the HMI index measuring current sales conditions in July rose one point to 62, the component gauging sales expectations in the next six months fell two points to 60, and the component measuring traffic of prospective buyers increased three points to 40 – the highest reading since June of last year.
Source: mpamag.com