Builder confidence in the single-family home market rose 1 percentage point to 56 in July, according to the agency. National Association of Home Builders/Wells Fargo Housing Market Index.
It was the seventh straight month of gains and the highest since June 2022. A reading above 50 is considered positive sentiment.
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Builders say an undersupply in the resale market is driving demand for new construction, but rising mortgage rates and supply-side challenges continue to weigh on the market.
“While builders continue to be cautiously optimistic about market conditions, the rise in mortgage rates of a quarter of a percentage point over the past month is a stark reminder of the pause-and-start process the market will experience as the Fed’s ongoing tightening cycle draws to a close , said NAHB Chief Economist Robert Dietz.
Popular Average Rates 30-Year Fixed Mortgage It topped 7% briefly in May and then again at the end of June. It was down only slightly last week. Higher interest rates are straining affordability in the market, and prices for existing homes are rising again.
Among the three components of the NAHB index, current sales conditions rose 1 point to 62 in July; buyer traffic increased 3 points to 40, the highest reading since last June; sales expectations for the next six months fell 2 percentage points to 60. The drop in expectations is due to rising interest rates and the resulting hit to affordability.
Yet despite higher mortgage rates, builders use fewer incentives. Only 22% of builders reported price cuts in July. That was down from 25% in June and 27% in May.
According to the latest data from the U.S. Census Bureau, sales of new homes in May were up 13% from April and 20% higher than in May 2022. The median price is down more than 7% from last May, but the median price may be affected by the mix of home sales, which are currently leaning towards the lower end.