Homebuilders have been focused on the move-up and luxury sectors, even though demand for entry-level homes is high. Builders say that given the high costs of land, labor and materials, they are unable to build as many starter homes as they might like. Home prices for new and existing homes have soared over the past few years, as demand dramatically outpaced supply.
Of the index’s three components, current sales conditions fell 6 points to 61, sales expectations in the next six months dropped 4 points to 61, and buyer traffic fell 2 points to 43.
Regionally, on a three-month moving average, builder sentiment in the Midwest dropped 2 points to 55; the West and South both fell 3 points to 68 and 65, respectively; and the Northeast plunged 8 points to 50.
“The fact that builder confidence dropped significantly in areas of the country with high home prices shows how the growing housing affordability crisis is hurting the market,” said NAHB Chief Economist Robert Dietz. “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.”