Sentiment Falls for Homebuilders and Potential Buyers

April 21, 2022

Homebuilder sentiment fell for the fourth consecutive month in April, dropping to a seven-month low as surging mortgage rates and high prices slowed sales and prospective buyer traffic.

The National Association of Home Builders sentiment index fell two points in April to 77. The NAHB’s measure of current sales dropped two points to 85, the lowest since September. A gauge of prospective buyer traffic decreased 6 points to an eight-month low of 60.

The housing market faces many headwinds, as record-low inventory has driven historic price gains, and surging mortgage rates further diminish affordability. Homebuilders have stepped up construction, with the number of new construction projects in March jumping to the highest level since 2006. However, supply chain disruptions, material shortages, and challenges finding labor have delayed the completion of many projects, and the gap between housing starts and completion continues to grow.

It is not just builders who are feeling gloomier, but buyers too. A survey from New York Federal Reserve found that the average probability of buying a home if a household moves during the next three years fell sharply to 60.7% from 68.5% in 2021. That marks the first annual decline since the survey began in 2014.

The survey also found that the share of people who viewed housing as a bad investment increased to 9.9% from 6.5% a year ago.

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