July 2022 marks the HMI’s (Housing Market Index) largest drop in its history, outside of the month immediately following the pandemic shutdown (April 2020).
Affordability is negatively impacting the builder market, as the cost of land, construction materials, and financing continue to surge upward.
In addition to the freefall of the confidence index, some builders are reducing prices as a means to counter a soft market and avoid more home purchase cancellations. June saw an enormous 15% of home buyer transactions cancelled before the planned closing date.
Builder confidence plunged in July as high inflation and increased interest rates stalled the housing market by dramatically slowing sales and buyer traffic. In a further sign of a weakening housing market, builder confidence in the market for newly built single-family homes posted its seventh straight monthly decline in July, falling 12 points to 55, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This marks the lowest HMI reading since June 2020 and the largest single-month drop in the history of the HMI, except for the 42-point drop in April 2020.