New home construction rose last month, but builder sentiment remains subdued

August housing starts, a measure of new home construction, rose 12.2% from July and fell 0.1% from a year ago, according to the US Census Bureau. After a sharp decline in early spring, housing starts remained relatively steady until last month.

This recent increase in new home starts is a good thing for the housing market because inventory has been very tight. Shortage of supply has been a big factor in driving up house prices amid rising demand as house prices have been rising.

They still indicate that the housing market remains volatile and that builders remain cautious.

Building permits in August were down 10% from the July revision, and 14.4% from a year ago.

Also, a survey released on Monday showed homebuilder confidence fell in September for the ninth month since 2014 (excluding 2020).

Sentiment fell as higher mortgage rates, supply chain issues and persistently high home prices continued to make homes less affordable for buyers. The National Association of Home Builders/Wells Fargo Housing Market Index measures market conditions and analyzes current sales, buyer traffic and sales forecasts for the next six months.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and high home prices, putting the purchase of a new home out of financial reach for many households,” said NAHB President Jerry Konter.

Builder sentiment has declined every month in 2022, and the slowdown shows no signs of abating, said NAHB chief economist Robert Dietz.

“Builders continue to struggle with high construction costs and the Federal Reserve’s aggressive monetary policy, which helped push mortgage rates above 6% last week, the highest level since 2008,” he said.

But, according to the report, buyers saw a meager increase: 24% of builders reported reducing home prices in September, down from 19% last year.

“In this soft market, more than half of the builders in our survey reported using incentives to promote sales, including mortgage rate reductions, free fixtures and price reductions,” said Dietz.

This story is developing and will be updated