SALT LAKE CITY — For the fifth month in a row, national homebuilder confidence fell, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
The index fell eight points in May to 69 – the lowest level of builder confidence for new single-family homes since June 2020.
“The housing market is facing increasing challenges,” said a statement prepared by Robert Dietz, chief economist for the homebuilders’ association. “Construction material costs are up 19% from a year ago; in less than three months, mortgage rates reached their highest level in 12 years; and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family.
Dietz went on to say first-time buyers and first-time buyers are struggling the most with the sharp rise in mortgage rates.
The National Association of Home Builders has conducted the monthly survey for more than 35 years. Any number above 50 indicates that more builders perceive market conditions as good than bad.
The survey asks about three areas: current new home sales, sales forecasts over the next six months, and traffic from potential buyers. All three areas fell in May.
“Housing is leading the business cycle and housing is slowing down,” association president Jerry Konter said in a press release. “The White House finally got the message and yesterday released an action plan to address rising housing costs that emphasizes a very important point that NAHB has long championed – the need to build more houses to ease the housing affordability crisis in the country.”
Wells Fargo senior economist Mark Vitner told KSL TV the survey still reflects a healthy market, but also shows homebuilders are increasingly concerned.
“I think the big upside is that interest rates have risen faster than expected and at a higher level, and that’s weighing on the housing market a bit,” Vitner said.
Vitner said first-time home buyers are still very active in the housing market, even though affordability has been an issue for some time.
“With interest rates rising, people are concerned that demand will hold up, but right now that’s not a problem, and that’s especially the case in Utah, where the economy is so much stronger than in the country as a whole,” Vitner said. “The demand for homes in Utah far exceeds the supply that builders can supply right now.”
The Salt Lake Home Builders Association said Utah’s economy is strong.
“Here in Utah, the fundamentals are strong,” said Jaren L. Davis, executive director of the Salt Lake Home Builders Association.
But Davis said there are signs the housing market is changing.
“Our builders are seeing a drop in traffic,” he said. They may be seeing an increase in contract cancellations, but that brings us more to a normal market. »
Davis said Utah’s ongoing housing shortage and population growth should keep demand high.
“Builders still have big lists of people interested in their homes,” Davis said. “So maybe some fall out and maybe some contracts are out of place, but somebody gets put back in the slot pretty quickly.”
Domestic builder sentiment is better in the west, with the region’s three-month moving average dropping six points in May to 83.