COLORADO SPRINGS, Colorado — America's homebuilders are feeling more pessimistic about their industry as results of a monthly survey released Monday found builder confidence fell to its lowest level since May of 2014.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index measures builder sentiment on a 1 to 100 scale. Generally, a monthly HMI reading of 51 or higher reflects a favorable outlook for the industry. September's HMI fell to 46, a decline of three points from August.
The NAHB explained in a news release that the combination of elevated interest rates, persistent supply chain disruptions for building materials, and high home prices are all taking a toll on affordability.
“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Georgia.
“In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month.”
Robert Dietz, the NAHB's Chief Economist, points out that builder sentiment has declined every month this year.
“The housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week, the highest level since 2008,”Dietz said.
“In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.”
Construction plan and permit activity data compiled by the Pikes Peak Regional Building Department also show a sharp drop locally in new home construction this summer. Permit activity in March reached a high mark for the year at 536 units, compared to 211 in July and 144 in August.
Greg Dingrando, the Public Information Officer for PPRBD explained that plans and permit precedes construction activity by several months. The majority of construction activity currently happening in the Pikes Peak Region is for new apartments.
"If you look at ’19, ’20, ’21, and now 2022, all of those active permits, we have almost 9,000 apartments under construction right now,” Dingrando said.
An additional 4,000 apartment units have been permitted so far in 2022 suggesting that commercial construction will remain strong in the months ahead.
While apartment construction is occurring all around the Colorado Springs metro area, the highest concentration of new units are being built downtown.
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