Confidence among home builders remains below the key breakeven threshold of 50, per the National Association of Home Builders (NAHB), as their Housing Market Index dropped two points to 39 in August. This marked the fourth consecutive monthly decline and the lowest reading since December as higher rates continue to dampen sentiment. One bright spot in this report was that future sales expectations for the next six months rose by one point to 49. While still in contraction, builders expect lower interest rates will help boost demand in the next month. Scores over 50 on this index, which runs from 0 to 100, indicate that most builders feel confident about the current and near-term housing market outlook, whereas lower readings signify there’s less optimism among builders.
What’s the bottom line? Though all three index components (buyer traffic, current and future sales expectations) remained below 50, NAHB Chief Economist, Robert Dietz, noted that, “With current inflation data pointing to interest rate cuts from the Federal Reserve and mortgage rates down markedly in the second week of August, buyer interest and builder sentiment should improve in the months ahead.”